How to Calculate Duty Under DAP, DDP and FOB: A Three-Leg Breakdown
By Harmony Shipping Services Team
How to calculate duty under DAP, DDP and FOB is one of the most common questions we get. The honest answer: you are calculating an import tax, not an export tax. The export leg is close to zero for most goods. The import leg is where the money is.
This matters because the term you choose does not change the total tax — it only changes who writes the check. Get that wrong and you either lose the order on price or eat the duty yourself.
1. How to Calculate Duty Under DAP, DDP and FOB: Split the Tax into Three Legs
A shipment from a Chinese factory to a US buyer’s door passes through three distinct tax layers.
| Leg | Where | What it is | Who bears it |
|---|---|---|---|
| 1 | China export | Export duty (0% for most goods) plus VAT (recovered via export rebate) | Seller, usually recoverable — effectively near zero |
| 2 | US import | Duty (HTS + Section 301 etc.) plus entry fees (MPF / HMF) | Depends on term: FOB and DAP = buyer, DDP = seller |
| 3 | US sale | State and local sales tax | Buyer or their customer — not your concern as exporter |
Bottom line: Leg 2 is what actually erodes margin. Leg 1 is usually near zero. Leg 3 is not yours.
Leg 1 changed in 2026 — this is new
The old shorthand “exports aren’t taxed” rested on zero export duty plus a recoverable VAT rebate. China’s Ministry of Finance issued a notice on 8 January 2026 adjusting the rebate regime:
- Photovoltaic products: export VAT rebate abolished from 1 April 2026
- Battery products: rebate cut from 9% to 6% (1 April – 31 December 2026), then fully abolished from 1 January 2027
- The applicable rate is determined by the export date on the customs declaration
So for solar and battery exporters, Leg 1 is no longer zero. The lost rebate has to be priced in. For most other categories the effect is negligible.
2. What each term actually covers
The Incoterm does not change the tax. It changes who is obligated to pay it and who clears customs.
| Step | FOB | DAP | DDP |
|---|---|---|---|
| China export clearance | Seller | Seller | Seller |
| Ocean / air freight | Buyer | Seller | Seller |
| Cargo insurance | Buyer | Seller (recommended) | Seller |
| US import clearance | Buyer | Buyer | Seller |
| Duty and entry fees | Buyer | Buyer | Seller |
| US inland delivery | Buyer | Seller (to named place) | Seller (to door) |
Quick memory:
- FOB — handover at the ship’s rail; everything after is the buyer’s problem
- DAP — seller delivers to the destination but does not touch clearance or duty
- DDP — seller takes clearance and duty too; the buyer just receives the goods
So when a supplier says “we can quote DDP,” they are saying: the Leg 2 bill is mine, and I have built it into the price.
3. FOB → DAP: add logistics, not tax
DAP involves no duty, so this step is arithmetic, not policy.
DAP price = FOB price + international freight + insurance + destination charges + inland delivery
Worked example — one 40HQ of furniture, Shenzhen to Los Angeles, October 2026 rates
| Item | USD | Note |
|---|---|---|
| FOB Shenzhen | 50,000 | Seller’s price, already includes ~800 of origin port charges |
| Ocean freight | 7,000 | 40HQ, current market |
| Insurance | 188 | (goods + freight) × 110% × 0.3% |
| Destination charges | 800 | Terminal handling, docs, THC |
| Trucking | 800 | LA port to nearby warehouse; 800–3,000 for inland points |
| DAP price | 58,788 | 60,988 with trucking at the 3,000 upper bound |
On the origin port charges: THC, export clearance and documentation come to roughly 800, and under FOB those are already inside the FOB price — which is why the table does not add them again. If you are starting from an EXW quote, add the 800 back before you run the rest of the math.
Note the obvious but frequently missed point: there is not a single dollar of duty in a DAP price. If your buyer assumed DAP meant duty-paid, they will get a separate duty bill at delivery. This is one of the most common commercial disputes in US-China trade.
4. DAP → DDP: this is where duty enters
This is the step that actually goes wrong in quotations.
DDP price = DAP price + duty + MPF + HMF + broker fee
Duty = customs value × combined rate
Two variables, both easy to get wrong.
(a) Customs value — the US uses an FOB basis
US Customs values goods at transaction value, and international freight and insurance are not added. The same container therefore carries a lower dutiable base in the US than in the EU, where valuation is CIF-based and freight and insurance are included.
In this example the customs value is 50,000 — the FOB number — not 58,788. That 8,788 of freight and insurance is not dutiable.
(b) Combined rate — look it up by HTS line, every time
US duty in 2026 is a stack. For a typical consumer good it may include:
- MFN base rate: 0–32%, set by HTS code
- Section 301 base layer: 12.5%
- Section 301 surcharge: 25% on most goods, 7.5% on some, 100% on EVs, 50% on solar
- Section 232: 50% on steel, aluminum and copper articles, where applicable
This example assumes 37.5% for the furniture (0% MFN + 12.5% + 25%). Do not reuse that number — look up the rate for your own HTS line.
(c) Two entry fees people forget
| Fee | Rate | In this example |
|---|---|---|
| MPF (Merchandise Processing Fee) | 0.3464% of value, with a floor and a cap | 173 |
| HMF (Harbor Maintenance Fee) | 0.125% of value, ocean imports | 63 |
The MPF floor and cap are adjusted annually for inflation. They are not listed here for that reason — check the current CBP figures before quoting. On low-value shipments the floor, not the percentage, is what drives the cost.
The full DDP quote
| Item | USD |
|---|---|
| DAP price | 58,788 |
| Duty (50,000 × 37.5%) | 18,750 |
| MPF | 173 |
| HMF | 62 |
| Broker fee | 150 |
| DDP price | 77,924 |
The three quotes side by side
| Term | Price | vs FOB | Buyer still pays |
|---|---|---|---|
| FOB Shenzhen | 50,000 | — | Freight, insurance, clearance, duty, delivery |
| DAP Los Angeles | 58,788 | +17.6% | Clearance and duty (~19,000) |
| DDP Los Angeles | 77,924 | +55.8% | Nothing |
The insight: FOB to DDP is a 55.8% increase, a gap of 27,924. Break it down:
| Component of the increase | USD | Share |
|---|---|---|
| Duty | 18,750 | 67.1% |
| Logistics (freight 7,000 + destination 800 + trucking 800 + insurance 188) | 8,788 | 31.5% |
| Entry fees (MPF + HMF + broker) | 386 | 1.4% |
So when a buyer asks why the number jumped, the answer is not “the forwarder got expensive.” Two thirds is duty and one third is freight. Neither goes to the forwarder — one goes to US Customs, the other to the carrier.
5. What “duty included” does not include
A DDP quote saying “duty included” does not mean every possible charge is covered. Confirm three exclusions before signing.
1. Antidumping / countervailing duties (AD/CVD)
These can run into the hundreds of percent and apply by product and country of origin. Most DDP quotes exclude AD/CVD. If your product line gets a case opened against it, the difference is likely yours to fund.
2. Examination costs
CBP does not charge for the exam itself, but terminal storage, drayage, devanning and redelivery are real costs. These are normally outside a duty-inclusive price and need their own clause.
3. Demurrage, detention and amendments
Charges arising from documentation errors or buyer-caused delays usually fall on the responsible party, not the DDP price.
Practical clause: state that “duty included” means the MFN rate plus Section 301 for the declared HTS line, and excludes AD/CVD, examination costs, demurrage and detention.
6. Three ways the calculation goes wrong
Mistake 1: using a CIF value as the customs value
The US is an FOB-basis country. Using CIF overstates the duty and inflates your quote. But if you ship to the EU or most of Asia, the reverse is true — freight and insurance belong in the base. The same formula does not travel across borders.
Mistake 2: ignoring the MPF floor
At 0.3464%, the percentage matters on high-value entries; the floor matters on low-value ones. A small shipment’s fee can be dominated by the floor, which distorts the landed cost percentage badly.
Mistake 3: averaging one rate across a mixed container
Five product categories in one container means five HTS lines and five rates. Entry is filed line by line. An average rate guarantees you get at least one line wrong.
7. How to Calculate Duty Under DAP, DDP and FOB: FAQ
Is there a general formula for duty under DAP, DDP and FOB?
Yes, one per term. DAP carries no duty — it is FOB plus freight, insurance, destination charges and delivery. DDP adds duty, MPF, HMF and the broker fee on top of DAP. FOB includes no import-side cost at all; the buyer pays duty at entry. All three run on the same spine: establish the customs value, then multiply by the combined rate.
How much more is DDP than DAP?
Exactly Leg 2: duty plus MPF, HMF and broker fee. In the example, DAP 58,788 versus DDP 77,924 — a difference of 19,136, or 32.6% of the DAP price.
Do I calculate tax into an FOB quote?
No. Under FOB the seller only handles China export clearance, and export duty is essentially zero. The exception is solar and battery products, where the 2026 rebate changes mean the lost rebate has to be priced into the FOB number — a separate issue from duty.
Can a Chinese supplier act as the US importer of record?
Technically yes, but it requires a US taxpayer ID (EIN), a customs bond and a US agent. Most small and mid-sized exporters complete DDP through a forwarder or a foreign trade service company acting as IOR. That is why DDP usually comes from a forwarder rather than directly from the factory.
Should I accept DDP if my supplier offers it?
Only if you can absorb three things: duty rate volatility (a policy change can turn a fixed price into a loss), clearance liability (exams, additional duty, re-export), and importer-of-record obligations. If any of those is unclear, DAP is the safer structure — you clear your own goods and you are not exposed to a supplier’s duty estimate.
How do I find the rate?
Look up the MFN rate by HTS code on the USITC tariff database, then layer Section 301 and Section 232 on top. If you are unsure, ask for a written rate confirmation for your specific code. Never accept a verbal duty number in a quote.
The bottom line
The question “how do I calculate tax under DAP, DDP and FOB” is really “which leg belongs to whom.” Leg 1 is usually near zero, Leg 3 is not yours, and Leg 2 is the real money. The Incoterm only decides who pays Leg 2.
Work in this order and the numbers hold: find the HTS code, confirm the valuation basis, compute duty and entry fees, then apply the term. Reverse the order and the quote is wrong no matter how carefully you add it up.
Notes: Freight figures (ocean 7,000, origin 800, destination 800, trucking 800–3,000) reflect October 2026 market rates and move with season and capacity; peak season can push them materially higher. All duty rates and fees above are illustrative; the applicable rate must be confirmed against your product’s HTS line. China export VAT rebate changes reflect the Ministry of Finance notice of 8 January 2026. US MPF and HMF rates follow 19 CFR 24.23 and 24.24; the MPF floor and cap are adjusted annually — confirm current figures with CBP. Incoterms allocation follows ICC Incoterms 2020.