Ultimate Guide to Import Duty Rates, Landed Costs, and Lead Times - Finding the Best Country for Apparel Manufacturing When Importing to the USA

T-Shirt Import Duty Rates by Country

A major factor in landed costs is the import duty rate levied on apparel and textiles entering the US. These tariffs vary based on the country of origin.

• China - For cotton t-shirts made in China, the current 2023 import duty rate is 16.5% under US Harmonized Tariff Schedule code 6109.10.00. For an order of 1,000 shirts at $2 base cost, this equates to $330 in import duties.

• Vietnam – Like China, Vietnam does not have any special US trade preferences, so cotton t-shirts also face a 16.5% import duty worth $330 for a 1,000 shirt order.

• Bangladesh - Imported apparel from Bangladesh like most Asian nations is subject to a 16.5% US import duty. For 1,000 cotton t-shirts, Bangladesh factories would face $330 in duties.

• India - Under the US Generalized System of Preferences (GSP), certain products including cotton apparel from India qualify for reduced duty rates. The current preferential rate is 2.7% for Indian cotton t-shirts, amounting to just $54 in duties on 1,000 units.

• Pakistan – Pakistan does not have any special US trade arrangements. Thus, cotton t-shirts shipped from Pakistan face the standard 16.5% import duty, totaling $330 for 1,000 shirts.

In contrast, certain countries enjoy duty-free access to the US apparel and textile market:

• Mexico - Thanks to the US-Mexico-Canada Agreement (USMCA), goods manufactured in Mexico including apparel ship duty-free to the US. For Mexican-made cotton shirts, there are no import duties.

• Nicaragua - Part of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), Nicaragua can ship cotton apparel duty-free to the American market. This represents major savings compared to standard tariffs.

• Lesotho – As a lesser developed country in Africa, Lesotho is eligible for duty-free access under the African Growth and Opportunity Act (AGOA) trade preference program. Garments manufactured here enter the US free of duty.

• Ethiopia – Like Lesotho, Ethiopia benefits from AGOA preferential status allowing apparel goods produced in certified factories to be imported into the US duty-free.

These duty rate differentials between manufacturing countries have major implications on landed costs. Sourcing decisions require analyzing duties along with other cost factors.

Landed Cost Comparison Between Countries

While import duties make up a portion of total landed costs, base production costs at each factory must also be accounted for. When comparing various country options on total per unit landed costs, the duty advantage is not always decisive.

For example, here is a cost breakdown for 1,000 cotton t-shirts from select countries:

• China – With base unit costs of $2 and a 16.5% duty rate, the total landed cost is $2,330.

• Pakistan – Assuming Pakistan has similar base costs to China at $2 per shirt, with a 16.5% import duty the total is also $2,330.

• Bangladesh – Again using an estimated base unit cost of $2, at a 16.5% duty rate the landed cost equals $2,330 for this order.

• Nicaragua – Since Nicaragua qualifies for duty-free access to the US, there are no import tariffs. However, base production costs are higher at an estimated $2.50 per shirt. Thus 1,000 shirts have a total landed cost of $2,500.

In this example, Nicaragua’s duty-free advantage is outweighed by the lower FOB costs in Asian manufacturing countries. Landed costs come out lowest in China, Pakistan and Bangladesh despite paying duties.

Of course, cost savings from duty exemptions become more impactful at higher order volumes where those import taxes really add up. They also save time and administrative hassle. But for lower minimums, base production cost differences can nullify duty advantages.

Lead Time Impacts of Manufacturing Locations

In addition to landed costs, production lead times also differ considerably based on sourcing geography. Transit times are a crucial factor for apparel importers getting goods to market quickly.

Average ocean freight transit times from major manufacturing regions:

• China to USA West Coast – 3-4 weeks

• China to USA East Coast – 5-6 weeks

• Bangladesh/Pakistan to USA East Coast – 6-7 weeks

• Central America to USA East Coast – 1-2 weeks

This faster ocean transit from countries like Nicaragua or Mexico in the Western Hemisphere allows for more rapid replenishment than longer Asian lead times. Air freight can also be used cost-effectively from these regions to enable fast turn deliveries.

For apparel importers focused on speed-to-market, regional Western hemisphere manufacturing has a time advantage over Asia. This provides flexibility to respond to trends and demand fluctuations.

Order Minimums Based on Country Capacities

Manufacturers in each country also have minimum order quantity requirements that buyers must meet to access their pricing tiers. This stems from setup costs that factories need to spread across overall order volumes.

• China – With its massive production capacities, Chinese factories typically have lower minimums in the range of 1,000 to 3,000 units per style. This provides flexibility for lower volume orders.

• Bangladesh – Major Bangladeshi export factories cater to high volume buyers. Their minimums tend to be 5,000 to 10,000 units due to emphasis on high efficiency.

• Pakistan – Pakistan has a broad range of textile and apparel firms with minimums starting around 1,000 units. But larger exporters may require 3,000 or more per style.

• Nicaragua – Due to smaller average factory sizes, minimums in Nicaragua are higher in the 3,000 to 5,000 range for export focused producers.

For a smaller 1,000 unit order, buyers may have limited factory options in countries like Bangladesh and Nicaragua. Importers seeking flexibility on order quantities under 5,000 units will find more choice among manufacturers in China, Pakistan or India.

Strategic Guidance for Apparel Sourcing Decisions

With so many variables from duties to transit times, narrowing country selection involves careful analysis of item costs, lead time needs and volume capabilities at each factory.

While duty savings are appealing, lower base production prices can outweigh taxes for smaller orders. Seeking GSP or duty-free countries makes most sense for higher quantities.

For fast replenishment needs, a Western hemisphere source closer to market reduces lead times. But higher minimums must be met.

Matching order sizes to a country’s production scale also ensures pricing tiers are maximized.

Robust apparel importing requires continuously evaluating total costs, capabilities and changing trade conditions across various manufacturing countries. There is no one-size-fits all sourcing solution. By taking a strategic approach, importers can optimize cost, quality and speed.