For each item purchased, the system will obtain the Duty Percentage as set-up on the stock item. It will then do a calculation of the percentage and work out the amount of applicable duty for the item. It will then add the amount to the inventory value of the item (adds to the import cost).
e.g. Purchase item for $100. Has 5% duty. Total cost would be $105
If there is a difference between the amount of calculated duty and the amount of duty entered onto the invoice, it will be allocated to Inventory Adjustment. (For example, if you have not got duty set-up on your items).
Another possibly way to handle this is to add the Duty to the International shipping amount and enter it as one total. That way, it will get treated as import costing and not go through the Duty process.