Import duty vs VAT/GST vs tariffs: the difference

Importers use "duty," "tariff," "VAT," and "tax" almost interchangeably, and customs paperwork doesn't help by lumping several different charges into one "amount payable" figure. But they are distinct charges, levied by different authorities, calculated on different bases, and applied in a specific order. Getting them straight is the difference between a landed-cost estimate you can quote a customer and one that's off by double digits. Here's what each one actually is.

Customs (import) duty

Customs duty is the charge a country levies on goods crossing its border, collected by the customs authority — CBP in the United States, the ABF in Australia. The rate is set by your product's classification under the Harmonized System: you find the HS/HTS line for the goods, and the rate is read off the tariff schedule.

What it's charged on — the duty base — varies by country. Most countries assess duty on the CIF value: goods plus insurance plus freight to the border. The United States and Australia are the notable exceptions, using a FOB / transaction-value basis that excludes international freight and insurance from the duty base (foreign costs incurred before export are still included). This is why your Incoterm matters so much — it determines what's already baked into the supplier's price and therefore what you add back or strip out to reach the customs value. See CIF vs FOB for the full breakdown.

Tariff — and why it's not a separate charge from duty

This is the confusion worth clearing up first. In everyday importer language, "tariff" and "duty" are the same thing. The tariff is literally the schedule of rates — the HTS is "the tariff" — and the duty is the amount you pay off it. When someone says "the tariff on this product is 5%," they mean the duty rate. There's no separate "tariff charge" sitting alongside the duty.

Where the distinction earns its keep is in separating the ordinary, most-favoured-nation duty from the additional, punitive tariffs stacked on top of it. In the US, that means Section 301 (China-origin goods), Section 232 (steel and aluminum), and IEEPA tariffs. These are not alternatives to the base duty — they're added to it, on the same customs value, additively. A 3% base rate plus a 25% Section 301 tariff makes the goods dutiable at 28%, not 25%. Those rates change frequently and depend on the HTS code and country of origin, so look them up rather than assuming a fixed figure — the special-tariffs guide covers how they stack. When people talk about "the tariffs," this extra layer is usually what they mean.

Import VAT / GST

Value-added tax (VAT) or goods-and-services tax (GST) is a consumption tax, owed to the country's revenue authority, but on imports it's collected at the border by customs on the authority's behalf. The critical feature: it's charged on a base that already includes the duty — typically customs value + duty + freight and incidentals — so VAT/GST compounds on top of the duty. Raise the duty and you raise the VAT base with it.

Australia's GST is the textbook case. The 10% GST is charged on the Value of the Taxable Importation (VoTI) = customs value + duty + international transport and insurance. Note that even though Australia excludes freight and insurance from the duty base, it adds them back for the GST base — the GST-on-imports guide walks through why. The big exception is the United States, which has no federal VAT or GST at all. There's no import-stage consumption tax line; state sales and use tax is a separate, post-entry matter and isn't collected at the border.

Excise

Excise is a domestic tax on specific goods — typically alcohol, tobacco, and fuel — levied by the domestic revenue authority and applied to home-produced and imported goods alike. Two things set it apart from duty and VAT. First, it's usually charged per unit or quantity (per litre of alcohol, per stick of tobacco) rather than as a percentage of value. Second, on imports it's collected at the border and sits inside the VAT/GST base — so VAT compounds on excise just as it compounds on duty.

Excise also explains some de minimis fine print: Australia's AUD 1,000 border threshold has a carve-out for alcohol and tobacco, which attract duty and tax regardless of value (see de minimis explained). And note the clean contrast with the US: it has no federal VAT, but it does levy federal excise on specific goods like alcohol, tobacco, and fuel. No VAT is not the same as no consumption tax.

How they stack, in order

Walk the charges in the sequence customs applies them and the compounding becomes obvious:

1. Start with the customs value (CIF, or FOB/transaction value for the US and AU).
2. Add base duty at the HTS rate.
3. Add any special tariffs (301/232/IEEPA) — same customs value, additive.
4. Add excise if it's a specific good (alcohol, tobacco, fuel).
5. Charge VAT/GST on the sum of all the above plus freight.

The US stops at step 4 — no VAT, no GST. Everywhere else, step 5 is where the duty and excise you've already added get taxed a second time.

Charge	Levied by	Based on	How it stacks
Import duty	Customs authority	Customs value (CIF; FOB for US/AU)	The base charge
Special tariff	Customs authority	Same customs value	Added on top of base duty
Import VAT/GST	Revenue authority (via customs)	Customs value + duty (+ freight/excise)	Compounds on duty and excise
Excise	Revenue authority	Quantity of specific goods	Inside the VAT/GST base

Want the actual numbers for your shipment? Run them through the US import-duty calculator or the Australia calculator, which apply each charge on the correct base and in the right order.