You import goods to the US and spot “MPF” written on the invoice you received from US Customs Border Protection (CBP). What is MPF? If you call the CBP to ask, you will know that most of the items you import in the US are subject to a Merchandise Processing Fee.
You need to factor in the MPF while planning your logistic expenses. But how to calculate the MFP fee? Don’t worry, it does not involve complex mathematics, it’s a straightforward process. However, there are also some conditions you must know before shipping to the US. So let’s find out what they are and how to calculate the MPF fee!
What is a merchandise processing fee?
If you are someone new to US imports, you might be hearing “MPF” for the first time. What’s all about this fancy term?
The merchandise processing fee is one of the many fees you pay when importing goods to the US. MPF is charged on items entering formally or informally in the United States. U.S. Customs and Border Protection basically charges this fee to cover the cost of processing your merchandise at the border.
In most trade transactions, MPF is paid by the importer of record, which can be the exporter, importer, or customs broker paying on behalf of either of them. But how much is the MPF fee? You can pay as little as $31.67 to as much as $614.35 when your goods cross the US border. So, how much exactly do you have to pay? It depends on the estimated value of your goods.
How to calculate the MPF fee?
Unlike customs duty, which depends on the HS code or HTS code of your goods, US customs charges a standard price of 0.3464% using an ad valorem fee structure. What is meant by ad valorem? Actually, this fancy term simply means that the percentage is based on the estimated monetary value of the goods in question.
Simply put, if you are wondering how to calculate your MPF fee, simply multiply this “0.3464%” by the total value of your goods, and then divide the answer by 100.
For example, to calculate the MPF for a shipment worth $10,000, you would do the following:
10,000 x 0.3464 = 3464
3464 ÷ 100 = 34.64
So, the MPF for this shipment is $34.64. But bear in mind that this is just the calculated MPF, not the exact amount you’ll pay to customs. The final MPF will depend on your country’s minimum and maximum fee limits.
Minimum & maximum MPF fee
As we told you, the above calculated MPF fee is not what you’ll actually pay to the customs. The actual amount will depend on the country of importation. Different countries have their own set of limits.
For example, if you are importing to the US, Customs and Border Protection charges a minimum MPF of $31.67 and a maximum of $614.35. What does this mean?
The minimum MPF applies to goods that don’t meet a certain value threshold, while the maximum MPF is applied to goods that go beyond the set limit.
Let’s take an example.
Your goods imported to the US are valued at $5000; the calculated MPF fee will be $17.32 (using the above-mentioned formula). You can see that $17.32 does not reach the minimum threshold of $31.67. But still, you will pay $31.67 as the minimum MPF fee.
Let’s now take an opposite scenario!
Suppose you have a shipment valued at $200,000. Using the same formula, the calculated MPF would come out to $692.80. However, since the maximum MPF limit is $614.35, customs will cap the fee at that amount, and you’ll only pay $614.35, even though the calculated fee is higher. This ensures you never pay more than the set maximum MPF.
Conditions for the merchandise processing fee
Remember when we said there are some conditions attached to the MPF fee calculation? Here they are!
MPF charges can vary depending on the country you’re importing into. It’s important to know the specific rates for your country before calculating the MPF.
For example, in the USA, there’s a flat MPF fee for shipments valued over $2500.
If your shipment is worth less than $2500, a few rules will kick in.
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If the import is for personal use and automatically processed (not handled by Customs and Border Patrol), the fee is about $2.
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If it’s for personal use, and processed manually (not by Customs and Border Patrol), the fee is about $6.
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If it’s manually processed and handled by Customs and Border Patrol, the fee is about $9.
What if your payment exceeds the $2500 in value? You’ll need to pay the calculated MPF, plus an additional $3. And if you are importing agricultural products in FTZ zones, the MPF is based on the amount of packaging material used.
MPF fee exemptions
You may want to calculate the MPF fee using the above formula and then pay the exact amount. But later on, you may find out your goods are exempt from merchandise processing fees. So, it’s important to know that not all imported goods are subject to MPF charges.
If your country has a free trade agreement with the country you’re importing from, you are legally exempt from paying the MPF. For instance, if you are shipping from Korea to the US, you can enjoy the fruits of the free trade agreement. However, even if you are shipping from a country listed in free trade agreements, your goods still need to meet other import regulations to qualify for this exemption.
To be eligible, the goods must:
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Be manufactured in the country with the free trade agreement.
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Comply with all relevant customs laws.
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Follow health and environmental safety regulations.
How to pay the MPF fee?
Now that you know how to calculate the MPF fee, how to make a payment to CBP? Here are a few methods that you can choose to make your MPF payment.
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Banker’s draft.
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Cashier’s check.
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Certified check from a national or state bank.
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U.S. government check, U.S. money order, or domestic traveler’s check (with a valid U.S. driver’s license, passport, or credit card to verify your signature).
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Credit card payments, but only for non-commercial imports and with authorization from the customs commissioner.
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Personal checks are also accepted, as long as they cover the full MPF amount.
There are a few things that won’t be accepted, like:
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Checks from foreign banks.
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Overseas traveler’s checks.
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Commercial bills of exchange.
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Uncertified checks, unless backed by a bond to cover fees, taxes, and duties.
Make sure all checks are payable to the United States Customs Service. If a check bounces, an additional $30 fee will be applied unless it’s the bank’s fault, not yours.
Ways to reduce your MFP charges
MPF is even less than 1 percent of your shipment value. But still, it adds up over time. So, can you reduce your MPF? You know now how to calculate the MPF fee, but how to reduce the MPF fee? Here are a few ways!
Import from trade-free zones
As already mentioned, importing from free trade zones means no need to ask how to calculate the MPF fee. Free Trade Zones (FTZ) allow countries to trade goods without import and export duties. This means you can save on shipping and customs clearance costs by importing from these zones. Some examples of free trade agreements include those with Australia, Africa, North America, Israel, Korea, Peru, and Singapore.
Consolidate entries
If you consolidate your goods and the custom MPF fee exceeds the maximum threshold, you will still pay the flat rate. This means if you order goods in bulk, you can save yourself a lot in MPF fees. Similarly, do some math and check if breaking down your large shipment saves you more than one large shipment. Opt for one that works best for you!
MPF duty drawbacks
Many governments offer duty drawbacks, or tax refunds, to importers who later export goods. This is an underutilized benefit, but if you export products that were either imported or used in manufacturing exported goods, you may be eligible for a refund of import duties, including MPF fees.
Final words
Merchandise Processing Fee is a user fee when importing goods in the US. It’s great to know how much exactly you have to pay under MPF. Know some great tips to save a few bucks by reducing or avoiding your MPF.
Plus, the best interest is to consult your freight forwarder. These certified professionals can even help to make MPF management fee comparisons and find ways to reduce your shipment cost.
FAQs
What is the difference between a Merchandise processing fee (MPF) and a harbor maintenance fee (HMF)?
MPF is charged on the items being imported via air or sea freight. HMF, on the other hand, applies to items imported only via sea freight. Besides, HMF is an unavoidable fee, not even free trade zones are exempt from this harbor fee.
Is MPF refundable?
MPF can sometimes be waived during import, but under the USMCA, it cannot be refunded after entry. However, through the duty drawback program, you can claim refunds for fees paid on MPF and HMF.
Who pays the MPF Fee?
The importer is responsible for paying the MPF, which is calculated when the customs declaration is processed. If the fees aren’t paid, it could delay the release of your cargo.
