Everything You Need to Know About Merchandise Processing Fees in US Imports

The Merchandise Processing Fee (MPF) is an essential charge imposed by U.S. Customs and Border Protection (CBP) on imports entering the United States. This fee is based on the value of imported goods and is intended to cover the costs associated with processing customs entries. Whether you’re importing goods via ocean freight, air cargo, or international mail, understanding the MPF is crucial for businesses and individuals involved in international trade. In this article, we will explore what the MPF is, how it is calculated, when it is required, and ways to manage and reduce this cost effectively.

What is the Merchandise Processing Fee (MPF)?

The Merchandise Processing Fee (MPF) is an important aspect of international trade, particularly for those importing goods into the United States. This fee is paid to the U.S. Customs and Border Protection (CBP) for processing the imports. The MPF is classified as an ad valorem tax, meaning it is calculated as a percentage of the value of the imported goods. This fee is in addition to any duties that may be levied on the shipment.

Importers must understand the implications of MPF as it directly impacts the cost of importing goods into the U.S. The MPF is assessed based on the value of the goods declared by the importer and is applicable to both formal and informal imports. Let’s explore in detail what the MPF is, how it’s calculated, when it’s required, and ways to minimize the cost for importers.

When is the Merchandise Processing Fee Required?

The MPF is required in two key scenarios:

• Ocean Freight Shipments: When goods are imported via ocean freight, the MPF applies to the imported merchandise, and the fee is assessed based on the declared value of the goods.
• Air Cargo Shipments: MPF is also charged when goods are transported via air cargo. The fee is calculated similarly, based on the value of the goods being imported.

Importers should be aware that the declared value of the goods is a crucial factor in determining the MPF amount. This declared value is typically stated on the commercial invoice, and MPF is calculated as a percentage of this value. Importantly, MPF is levied on both dutiable and duty-free imports, meaning it applies whether or not duties are imposed on the goods.

How is the Merchandise Processing Fee Calculated?

The calculation of MPF is fairly straightforward but can vary depending on whether the import is formal or informal:

Formal Entries

For imports valued at $2,500 or more, a formal entry is required. The MPF for these shipments is calculated as 0.3464% of the declared value of the imported goods on commercial invoice. This value is calculated excluding freight charges, insurance costs, and the duty itself.

Informal Entries

For shipments with a value of less than $2,500, which are considered informal entries, the MPF is assessed as a fixed fee based on the mode of transportation and whether the entry is processed manually or automatically.

Here is how the fee is typically structured:

• Automated and informal entries (not processed by CBP): $2.
• Manual and informal entries (not processed by CBP): $6.
• Automated or manual entries (processed by CBP): $9.

The MPF for informal entries is simpler because it’s fixed, unlike formal entries that require a percentage-based calculation.

What Are the Conditions for Merchandise Processing Fee?

There are a few conditions and nuances when it comes to the Merchandise Processing Fee:

Shipments Under $2,500

As mentioned, goods valued at under $2,500 are subject to a fixed MPF. However, if the goods are manually processed and valued above $2,500, a surcharge of $3 is added to the MPF.

Payment Timing

Importers are required to pay the MPF at the time when the entry summary for the shipment is filed with CBP. The fee must be paid within 30 days of submitting the entry summary. Failure to do so could result in delays, fines, or additional penalties.

Processing Fees for Automated Entries

For automated systems used by CBP, the MPF fee might be reduced due to the efficiency of the system. Automated entries are typically less expensive for importers compared to manual entries.

Exemptions to Merchandise Processing Fee

In certain cases, some goods and commodities are exempt from the MPF under trade agreements or specific regulations. These exemptions are granted based on diplomatic or economic factors, and they apply to goods imported from certain countries.

For example, goods from the following regions are generally exempt from MPF:

• Canada
• Mexico
• Australia
• Korea
• Israel
• Certain South American countries
• US overseas territories

These exemptions are largely due to specific trade agreements like the North American Free Trade Agreement (NAFTA) or United States-Mexico-Canada Agreement (USMCA), which eliminate certain import duties and fees. However, these exemption rules change over time, and it’s important for importers to stay updated through official channels like the CBP website to ensure they have the most current information.

Minimum and Maximum Merchandise Processing Fee

The MPF is not without limits. It has both a minimum and a maximum fee structure.

• The minimum MPF is $27.75.
• The maximum MPF is $538.40.

This fee structure ensures that MPF remains a fair charge for small and large importations alike. The minimum fee ensures that even small shipments are charged a reasonable fee for processing, while the maximum fee prevents larger shipments from incurring an overly burdensome cost.

How Are MPF Payments Made?

MPF payments are the responsibility of the importer, and they must be paid when the import customs entry is processed. These payments are typically made in U.S. Dollars and can be submitted via:

• Cashier’s check
• Bank draft

The U.S. Customs and Border Protection (CBP) accepts these forms of payment, and they must be made promptly. Importers who fail to pay the MPF on time may experience delays in the release of their goods. Delays in payment can lead to interest charges and further penalties. Additionally, non-payment can result in sanctions, including potential blacklisting by CBP.

Difference Between Merchandise Processing Fee (MPF) and Harbor Maintenance Fee (HMF)

Though both the MPF and Harbor Maintenance Fee (HMF) are charges applied by U.S. Customs, they serve different purposes and have distinct characteristics.

• MPF is assessed based on the value of the imported goods and applies to both air and ocean freight shipments.
• HMF, on the other hand, is a fee that applies exclusively to ocean freight shipments and is levied at 0.125% of the value of the cargo in transit.

Unlike MPF, the HMF does not have a fixed fee structure and is not applicable to air freight. Therefore, importers should ensure they understand which fee applies to their specific shipment type to avoid confusion.

How Does MPF Impact International Shipping Costs?

The U.S. is a key player in global trade, and the costs associated with importing goods to the U.S. affect the overall shipping costs. MPF is one of the many factors that contribute to international shipping costs. When the MPF increases, it can lead to a rise in freight charges, which impacts global trade prices.

Similarly, when the MPF decreases, it can reduce the overall cost of imports, providing a relief to businesses looking to lower their shipping expenses. Thus, MPF fluctuations play a crucial role in shaping global shipping rates, much like other factors such as fuel prices or changes in government regulations.

Ways to Reduce MPF Costs

Importers who are looking to minimize their MPF costs have several options to consider:

• Consolidated Import Entries: By combining multiple shipments into one entry, importers can reduce the overall MPF costs.
• Leveraging Free Trade Agreements (FTAs): Importers can explore free trade programs and exemptions, which may reduce or eliminate MPF charges for specific goods.
• Using Chapter 98 Programs: Certain importers may be eligible for the Chapter 98 program, which allows them to document and import goods under more favorable terms, including lower MPF rates.
• Staggering Imports: By importing goods in smaller, staggered batches, importers can potentially reduce the value of individual shipments and avoid triggering higher MPF rates.
• Stay Updated with FTAs: Each Free Trade Agreement (FTA) has its own set of rules regarding MPF, and importers should familiarize themselves with these to identify any exemptions that may apply to their specific imports.

Conclusion

The Merchandise Processing Fee (MPF) is a significant cost component for businesses importing goods into the United States. Understanding how the MPF works, when it applies, how it’s calculated, and the exemptions available can help importers manage their shipping expenses more effectively.

It is essential to stay informed about MPF rules and regulations, as these can change frequently. Keeping track of updates from the U.S. Customs and Border Protection (CBP) ensures that importers comply with all requirements and avoid unnecessary penalties.

For businesses engaged in global trade, partnering with companies like Credlix, a global supply chain management firm, can help streamline the import process, reduce costs, and ensure compliance with all customs and regulatory requirements.

Also Read: What is the Merchandise Export Incentive Scheme (MEIS)? A Guide for Indian Exporters