What is Merchandise Processing Fee?
The Merchandise Processing Fee (MPF) is a payment that needs to be made to the US Customs and Border Protection (CBP) for imports into the US. MPF is considered to be an ad valorem tax, meaning that it is a percentage of the estimated value of the imported goods. This fee is levied for imports made formally or informally. The value of MPF is based on the assessed value of the imported goods, and it is calculated as proportionate to the estimated value of goods. MPF can be considered to be a tax that is paid in addition to the duties levied on any given shipment's entry summary.
When is MPF required?
MPF is charged for two kinds of scenarios: when goods are being imported through the ocean freight route or when they are imported through the air cargo route. The declared value or value entered on the import forms determine the MPF of merchandise of an import. MPF is calculated for both dutiable and duty-free imports and goods.
How is Merchandise Processing Fee Calculated?
The value of MPF is 0.3464% of the cargo value that was declared on the commercial invoice for imports. This fee is based on the value of the imported merchandise, excluding freight expenses, insurance charges, and duty. The MPF charge is fully covered by the importer of the goods. MPF for informal entries is assessed on goods transported to the US via air, ship, and international mail and is a fixed fee that ranges from US$2, US$6, and US$9 for every shipment. Formal entries are required for the import of goods valued at US$2,500 or higher. On the other hand, informal entries are for imports involving personal use or for commercial imports valued under US$2,500 (On the basis of importation requests made by the port director).
Also Read: US Customs Clearance Process - Fees, Processing Time & Payment
Conditions applied to Merchandise Processing Fee (MPF)
As per the CBP, MPF is levied at flat rates for shipments wherein the value of goods is less than US$2,500. The value of MPF for shipments worth less than US$2,500 is based on some of the following criteria:
Firstly, for imports that are automated, informal, and not processed by the CBP, the fee is US$2. Secondly, for imports that are manual, informal, and not processed by the CBP, the fee is US$6. Thirdly, for imports that are automated or manual and informal, but processed by the CBP, the fee is US$9. There are some other conditions too, such as when imports are manually processed and valued at more than US$2,500, a surcharge of US$3 is added to the overall MPF value.
The MPF needs to be paid while the entry summary — the documentation required for the CBP to collect statistics, evaluate duties, and verify compliance to regulations — of a shipment is being recorded. The latest time up to when importers can pay this fee is 30 days after the entry summary is presented.
Exemptions to Merchandise Processing Fee
Goods and commodities coming from certain countries are exempt from MPF charges, including Canada, Mexico, Australia, Mexico, Korea, overseas US territories, Israel, certain South American countries, and a few other nations too. Specific trade agreements and treaties are the reasons that these countries are on this list. So, importers bringing in goods from these countries do not need to pay MPF to the CBP authorities. It’s worth noting that exemption regulations are highly dynamic in nature and evolve frequently. So, shippers will need to constantly refer to official CBP sites and other public sources if they are looking for reliable resources to get information about the same.
Minimum and Maximum Merchandise Processing Fee
MPF is certainly not limitless, and has certain boundaries when it comes to how much an importer has to pay for each shipment full of batches of goods. The value of MPF cannot be higher than US$538.40 or lesser than US$27.75. Now, all these figures are highly dynamic in nature and change frequently. That’s why businesses may find conflicting information from different sources. Therefore, once again, users can refer to official CBP sources to get reliable information about the ever-changing figures.
How MPF Payments are made?
Paying the MPF fee is the importer's prerogative in an international trade-related exchange between them and any exporter. The timing, processing fee amount, increments or reductions in the fee, latest payment dates, and similar other aspects related to the fee will be decided by the CBP in the US. This is a fee that is charged and paid when the import customs entry is processed. The MPF amount payable is made in US Dollars. These payments are made through cashier's check, or bank draft, to the US Customs and Border Protection. If an importer fails to pay the MPF on time, this results in delays in the cargo release. As a result of that, importers will then have to pay interest amounts. Additionally, delays and non-payments of MPF can result in heavy penalties, bans, blacklisting, and sanctions by the CBP, the highest authority on MPF.
Difference between Merchandise Processing Fee (MPF) and Harbor Maintenance Fee (HMF)
Like MPF, the Harbor Maintenance Fee (HMF) is also an amount that the CBP levies on ocean shipments. Here are some of the differences between the two fees:
The harbor maintenance fee is chargeable at 0.125% of the total value of the cargo in transit. Secondly, HMF is not applicable on any kind of air freight trade. Thirdly, unlike MPF, HMF does not have fixed upper and lower rates.
Also Read: Importer Of Record (IOR) in US Customs | Meaning, Requirements & More
How Does the MPF Impact International Shipping Costs
The US continues to remain one of the pivotal zones for global trade. Costs levied on importers lead to higher freight costs for shippers looking to export their goods to the US. As a result, just as is the case with fuel prices rising in one region to inflate international shipping rates, an increase or decrease in MPF results in a global inflation or reduction of freight costs and overall shipping expenses.
Ways to reduce MPF
There are a few ways in which importers can reduce their MPF expenses and, by extension, their overall shipping costs. Some of them are:
- Making consolidated import entries
- Leveraging free trade programs to use exemptions on MPF rates
- Making use of a chapter 98 program for the documentation and import of goods
- Importing goods in staggered batches based on the value of the goods being imported
- Learning about the various FTAs and seeing how MPF is impacted by each of them for every import made.
