The Merchandise Processing Fee (MPF) is a fee charged by the U.S. Customs and Border Protection (CBP) on most goods imported into the United States. It is used to help cover the costs associated with reviewing, processing, and inspecting import shipments as they enter the country.
All entries for the Merchandise Processing Fee can be classified as “informal” or “formal.” Informal entries typically cover shipments valued at under $2,500, while formal entries apply to goods valued at or above $2,500. The MPF rate is capped, with a minimum and maximum charge for formal entries.
The Merchandise Processing Fee is mandatory for nearly all imports, although some Free Trade Agreements (FTAs) offer exemptions. Given that most imports are subject to an MPF fee, it is important to research your specific shipment and, if relevant, include MPF as part of your overall shipping costs.
Frequently Asked Questions
The following are answers to frequently asked questions about the Merchandise Processing Fee (MPF) in the context of international shipping.
What Is the Purpose of the Merchandise Processing Fee (MPF) in Customs Clearance?
The Merchandise Processing Fee (MPF) exists to help U.S. Customs and Border Protection (CBP) cover the costs of reviewing, processing, and inspecting shipments coming into the U.S. Since international trade involves a vast number of entries every day, the MPF helps ensure customs has the resources to manage this volume effectively.
The funds raised by Merchandise Processing Fee (MPF) pay for things such as:
- Reviewing and processing import documents.
- Conducting inspections of imported goods.
- Enforcing customs regulations.
- Improve and update technology systems.
- Improve trade facilitation.
- Maintain trade infrastructure.
How Is the Merchandise Processing Fee (MPF) Different from Tariffs?
While both MPF and tariffs are charges imposed on imported goods, they serve different purposes. The MPF is a fee designed to cover the administrative costs of processing shipments. It is a flat charge that varies depending on the value of the goods and whether the entry is informal or formal. Tariffs, however, are taxes charged to specific imports, often to protect domestic industries or serve other national interests or objectives.
Unlike the MPF, tariffs are generally calculated as a percentage of the value of the goods and can vary significantly depending on the type of product and the country of origin. Additionally, unlike the MPF, tariffs do not have a maximum limit, as they are typically assessed as a percentage of the import’s value. You can estimate U.S. import tariff rates by looking up the applicable harmonized code.
Who is Responsible for Paying the Merchandise Processing Fee (MPF)?
The responsibility for paying the Merchandise Processing Fee (MPF) usually falls on the importer of record. As the one bringing goods into the U.S., the importer is responsible for handling all customs duties and fees, including the MPF, during the import process.
However, there are exceptions. If the goods are being imported under a free trade agreement, the MPF may not apply, depending on the specific terms of the agreement. Additionally, under a specific Incoterm, DDP (Delivered Duty Paid), the seller is responsible for handling customs clearance and paying the MPF on behalf of the buyer. Incoterms are international commercial terms set by the International Chamber of Commerce (ICC), and they are negotiated to define the responsibilities between the buyer and seller in international transactions. These terms are intended to clarify who will handle various costs and risks during the shipping process, ensuring smooth operations in cross-border trade.
What Are the Differences Between Informal and Formal Entries?
The key difference between informal and formal entries is the value of the goods being imported.
- Informal Entries: These apply to shipments valued under $2,500. Informal entries have a flat MPF based on the mode of transportation (air, sea, mail, or land). They typically involve less paperwork and fewer compliance requirements than formal entries. However, some products may not be eligible for informal entry, such as high-risk products, regardless of their value.
- Formal Entries: Formal entries apply to goods valued at $2,500 or more. In these cases, the MPF is calculated as a percentage of the shipment’s value, with a minimum and maximum fee in place. Formal entries require more documentation, including customs bonds, and often undergo more thorough inspections.
Are There Merchandise Processing Fee (MPF) Exemptions Under Free Trade Agreements (FTAs)?
Yes, certain Free Trade Agreements (FTAs) offer exemptions from the Merchandise Processing Fee. Some of the key FTAs that include MPF exemptions are:
- United States-Mexico-Canada Agreement (USMCA)
- Korea-U.S. Free Trade Agreement (KORUS)
- Australia-U.S. Free Trade Agreement (AUSFTA)
- Bahrain-U.S. Free Trade Agreement (BHFTA)
- Chile-U.S. Free Trade Agreement (CHLFTA)
- Israel-U.S. Free Trade Agreement (ILFTA)
- Singapore-U.S. Free Trade Agreement (SGFTA)
- Oman-U.S. Free Trade Agreement (OMFTA)
- Peru Trade Promotion Agreement (PETPA)
- Colombia Trade Promotion Agreement (COTPA)
- Panama Trade Promotion Agreement (PATPA)
- Central America-Dominican Republic-U.S. Free Trade Agreement (CAFTA-DR) – Covers El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic, and Costa Rica.
To qualify for these exemptions, the importer must ensure that the goods meet the rules of origin under the specific FTA. Note that some agreements may offer partial exemptions or reduced MPF rates. The appropriate documentation proving the eligibility of the goods for the exemption must be submitted at the time of entry.
Please note that some trade agreements do not include MPF exemptions, so it’s important to check the specific terms of each agreement. For more information on trade agreements, visit USTR’s website.
What Are the Consequences of Not Paying the Merchandise Processing Fee (MPF)?
Failure to pay the MPF can lead to several serious consequences. First, U.S. Customs will not release the goods until the fee has been paid in full. Not only will this result in delays, but may also result in storage fees.
Additionally, unpaid fees can result in interest charges, financial penalties, and, in some cases, legal action. Importers who repeatedly fail to pay the MPF may face further consequences, such as additional inspections or restrictions on future imports.
How Does the Merchandise Processing Fee (MPF) Work When Importing Into Canada?
Canada does not have a fee equivalent to the U.S. Merchandise Processing Fee. The Merchandise Processing Fee (MPF) is specific to imports into the United States and does not apply to imports into Canada. However, Canada has its own system of import-related fees and duties managed by the Canada Border Services Agency (CBSA).
When importing goods into Canada, most shipments are assessed a 5% fee for Goods and Services Tax (GST). In some cases, additional charges may include Provincial Sales Tax (PST) or Harmonized Sales Tax (HST) and potentially other duties and fees based on the product’s classification, value, and origin. It is important to keep in mind that some of these duties are not collected at the border but rather at a later stage.
Do I Need to Pay the Merchandise Processing Fee When Importing Goods From China Into the U.S.?
Yes, when you import goods from China into the United States, you will need to pay the Merchandise Processing Fee (MPF). This fee is applicable to most imports, and China is not exempt from it. Alongside the MPF, you should also be aware of additional tariffs that may apply based on the classification of the goods.
While there are many opportunities to import goods from China that can be beneficial for your business, it’s essential to consider these costs beforehand to avoid unexpected expenses. Proper planning will help ensure a smoother import process and maximize the advantages of your imports.