When shipping internationally, your shipment may be subject to import duties and taxes. These additional charges are calculated based on the item type and value. Every country taxes items differently.
What are Duties and Taxes?
Import duty is a tax imposed by a government on specific commodity types from other countries. This increased price on imported goods is meant to make these products less "desirable" so buyers are encouraged to support the domestic market. A duty is charged differently depending on the item category or HS code.
For example: If you ship a phone to Canada there is 0% duty, however, if you ship a t-shirt to Canada, there is an 18% duty.
Import tax is a flat tax charged by customs regardless of the commodity type upon the importation of goods. Import tax can be referred to as GST or VAT however there is a slight difference outlined in this article.
For example, regardless of whether you are shipping a phone or a t-shirt to Canada, there is a tax of 5%.
With Easyship you can choose to deliver shipments with duties pre-paid (DDP) or with duties unpaid (DDU) with a click of a button.
What is a Tariff?
It's common to hear the words "tariff" and "duty" used interchangeably, however, there is a slight difference in definition. A tariff is the taxed percentage of an item. For example, if I import a carpet to the United States, US Customs would charge a tariff of 4.5%.
Import duty is the actual amount of money paid on the imported product, and this value depends on the quantity imported. In the case of the carpet to the US, when importing $1,000 worth of carpets, the import duty would be $45.
Who Pays Duties and Taxes?
You can choose who will be responsible for paying duties and taxes at the time your shipment is created.
Shipping post-paid is referred to as DDU (delivery duty unpaid) which means that the receiver/customer will get contacted by customs once their shipment arrives and will have to settle any charges in order for customs to release the shipment and have it delivered to the customer.
Shipping pre-paid is referred to as DDP (delivered duty paid) which means the sender is responsible for paying the duties. In many eCommerce cases, the seller includes these duties at checkout and directly collects payment from the customer for DDP shipping.
Note that as not all couriers offer prepaid services if you choose to pre-pay duties and taxes you will only be shown the couriers that can accommodate this request.
You can choose to be transparent with your customers and display the Duties and Taxes at checkout. This is a great way to build trust with your international customers.
How Duties and Taxes are Calculated?
Not all countries calculate how to charge duty and taxes in the same way. Below are the two most common calculation types:
CIF (Cost, insurance, and freight) method means the import duty and taxes are calculated based on the value of the imported goods as well as shipping costs. An example of this is Canada.
FOB (Free on Board) method means the import duty and taxes are calculated only on the customs values of the imported goods. An example of this is Australia.
More information on our blog post: What is the difference between FOB and CIF?
Other factors that are taken into account when calculating duties and taxes:
- Origin/Destination Country
- Item Category (HS Code)
- Value of the product and/or shipping cost
Estimating import fees can be difficult as couriers charge brokerage fees. Brokerage fees are costs associated with brokering the payment to customs.
Typically express couriers like DHL, FedEx and UPS charge relatively high brokerage fees as they fast-track the customs process to 1 or 2 days. Postal services on the other hand charge low brokerage fees, however, customs clearance can take 3+ days depending on the season.
For example, UPS Canada's brokerage fee chart can be found here. This is a charge on top of the duty and taxes.
Duties and Taxes Resources and Calculator
On this page, there is a breakdown of every import policy for all serviced countries. This is one of the bests recourses out there for any shipper looking to quickly understand how duties and taxes are calculated, and how much their customer will be charged when the parcel arrives.
Get an estimate on duties and taxes for a shipment in seconds with our Duty and Tax Calculator.
In this video, we will cover:
- What import taxes and duties are
- How they vary by the destination country
- How Easyship calculates and displays taxes and duties upfront
- How to pre-pay these taxes and duties when creating shipments
- How Easyship handles all the paperwork necessary to clear customs smoothly
Q: Why do the estimates change depending on the courier service?
A: Brokerage and handling fees in customs vary depending on the service and courier type.
Q: Do all services off pre-paid duty and taxes?
A: No, most courier services on Easyship do not offer pre-paid duty and taxes. When selecting pre-paid, the list of couriers will reduce. Typically postal and hybrid services do not support pre-paid duty and taxes.