Understanding tariffs

A tariff is a tax imposed by a country on goods imported from abroad, acting as a fee required when products cross international borders. Governments may implement tariffs to generate revenue or to protect domestic industries by increasing the cost of imported goods, thereby promoting local alternatives.

When importing goods to a country that has imposed tariffs, a company must pay tariffs to that country's customs authority. For example, United States (U.S.) imports require payments to U.S. Customs and Border Protection. Generally, the importer of record bears responsibility for paying these import duties, which can often be the merchant as the owner of the goods at the time of import, unless other arrangements are made. Therefore, the merchant's customers may be responsible for paying any outstanding amount before receiving their order.

Recognize different types of tariffs

Tariffs can vary significantly in how they're applied, including:

• Ad valorem tariffs: Calculated as a fixed percentage of the import's value.
• Specific tariffs: Set as a fixed amount per quantity of imported goods.
• Tariff-rate quotas: Tariffs that increase after surpassing a certain quantity of imports.

Stay updated on country specific tariff charges

You must stay informed about tariffs, which are typically contingent on the origin of goods rather than the seller's location. This means that only you, as a merchant familiar with the origin of your products, can accurately determine whether your goods are subject to tariffs based on the latest regulations from your government.

Recognize the primary objectives of tariffs

Tariffs are often imposed to generate revenue for governments and protect domestic industries by raising the prices of imported goods.

Determine who bears the costs of tariffs

Although businesses importing goods typically initially pay applicable tariffs, these costs often trickle down to consumers through increased product prices.

Calculate tariffs

Applicable tariffs depend on a variety of factors including the assigned Harmonized System (HS) code, Country of Origin (COO), customs valuation, and shipping destination. When shipping internationally, tariffs are typically collected after the shipment reaches the destination country and goes through customs. Here's how the process might look:

1. Arrival and declaration: Upon arrival, the carrier or shipping agent declares the goods with customs, including their value and origin.
2. Assessment and calculation: Customs officials assess the goods using the Harmonized System (HS) codes and origin to determine applicable tariffs. The HS code is a standardized numerical method of classifying traded products and is used by most global customs authorities to classify products and determine the applicable tariffs. Using the information provided and the country’s tariff schedule, customs calculates the amount of duty (tariff) and any other taxes (such as VAT or GST) that must be paid.
3. Payment and release: After customs assess the duties and taxes owed and that amount is paid by the importer (or their agent), the goods are released from customs and can be delivered to the recipient.

The exact timing of when tariffs are calculated can vary depending on the customs process in the destination country and the completeness and accuracy of the paperwork submitted. Delays in tariff calculation can occur if there are discrepancies in the declared value, classification issues, or if the shipment is selected for a detailed inspection.

Understand tariff collection mechanisms

Customs authorities within the destination country typically collect tariffs. You need to consider these costs when pricing your products.

Tip

Shopify doesn't automatically include tariffs in the charges. As a merchant, it's your responsibility to consider potential import duties and taxes when pricing your products. This ensures that you account for any additional costs that may apply as your products enter the customer's country.

Analyze the impact of de minimis on tariffs

A de minimis threshold may apply to exempt certain lower-valued shipments from duties and taxes. This exemption can significantly affect the final cost, influencing pricing strategies and potentially offering a competitive edge to sellers who manage shipments below this threshold. The status of this exemption is subject to change. As a merchant you should assess whether your sales may benefit from this exemption under the rules of the country to which you’re importing.

Checklist for United States - Mexico - Canada Agreement compliance

To learn more about USMCA compliance, you can follow the checklist in this article. This article is provided for general informational purposes only and does not constitute legal advice. You should consult with a qualified attorney for specific advice and latest developments.

Tip

Tariff policies are subject to change. Verify the current policies for the countries you're importing to.