Duties and import taxes
If you ship internationally, then your customers might be charged additional duties and import taxes when they receive their shipments. You can charge duties and import taxes at checkout if you meet the requirements. Before you set up charging duties and import taxes at checkout, ensure that you review this information about duties and import taxes.
A carrier is a service that transports a product. For products that are shipped across borders, they act as a customs broker and are responsible for collecting duties and import taxes. Carriers collect these fees either from the seller or the buyer, depending on the incoterms that are used for the shipment.
Carriers might charge a brokerage and disbursement fee for their services.
The options for how to manage duties and import taxes are called international commerce terms, or incoterms. Incoterms determine how your customer is charged, and how your shipping carrier collects payment for duties and import taxes.
The following are the two most frequently used incoterms:
- Delivered duty paid (DDP). This term indicates that the seller assumes responsibility for any import costs that might be payable when goods cross borders, such as duties, import taxes, or brokerage/disbursement fees. You can collect payment for these charges during the checkout process. When the DDP incoterm is available, using it provides customers with a total price for the product and helps to avoid shipping delays.
- Delivered at place (DAP), also called delivered duty unpaid (DDU). This term indicates that the seller is only responsible for shipping the product, and that the customer is responsible for paying any import costs to the shipping carrier, such as duties, import taxes, or brokerage/disbursement fees upon delivery. Some shipping carriers charge additional fees for collecting duties upon delivery if the duties haven't been paid in advance. Using the DAP incoterm might result in additional charges to the customer.
To help your customers avoid additional fees, you can charge any applicable duties and import taxes in your checkout. Your carrier invoices you later for duties and import taxes, which you can then pay with the fees that you collect from your customer.
Fees that might be charged when importing goods come from a variety of sources, including the following:
Customs fees that apply to a shipment depend on its destination, value, and the carrier that transports the goods.
Low-value goods tax and import tax
The tax portion of the customs fees is either a low-value goods tax or an import tax, depending on the de minimis, a value threshold which varies between different countries and regions.
Low-value goods tax
A low-value goods tax is applied to shipments in some countries and regions for shipments that are below the de minimis if you're registered to collect tax in that country or region. For example, The European Union has a low-value tax threshold where VAT is collected on cross-border orders that are equal to or less than 150 EUR, while the United Kingdom has a low-value tax threshold where VAT is collected on cross-border orders that are equal to or less than 135 GBP.
Low-value goods taxes apply in the following countries:
- New Zealand
- the European Union
- the United Kingdom
In most cases, the DDP incoterm is recommended for shipments to areas with a low-value goods tax so that orders that go above the threshold also have the duties and import taxes calculated at checkout.
For example, when you use the DDP incoterm for the European Union, the following occurs:
- VAT is applied to orders that are equal to or less than 150 EUR.
- Import VAT and duties are applied to orders that are greater than 150 EUR.
When you use the DDP incoterm for the United Kingdom, the following occurs:
- VAT is applied to orders that are equal to or less than 135 GBP if you have entered a tax registration for the UK in your tax settings.
- Import VAT and duties are applied to orders that are greater than 135 GBP.
Low-value goods taxes are generally remitted to tax authorities by using a tax return. It's up to you to decide whether you should collect and remit taxes. If you're not sure if you should register to collect low-value goods taxes, or how to remit low-value goods taxes, then contact the country or region's tax authority or a local tax expert.
If you process a refund for an order that has low-value taxes applied, then contact the country or region's tax authority to recover the tax that you've remitted. You can only remit or recover taxes in countries where you're already registered to pay taxes.
Import taxes are charged by a country or region's customs authority for shipments that are above the de minimis. In most cases, this tax is equivalent to the local sales tax, such as VAT or GST. If you process a refund for an order that has import taxes applied and that has been fulfilled, then contact the country or region's customs authority to recover the the tax that you've remitted.
Customs duty is a charge applied to shipments by the receiving country or region's customs authority for shipments that are above the de minimis. Customs duty is calculated based on the following factors:
- the product’s declared value and shipping costs
- the product category as determined by the HS code (Harmonized Item Description and Coding System)
- the country or region of origin
- the destination country's tariff rates
- applicable trade treaties
Duties and import tax based on the product's declared value might be affected by discounts or free items.
Brokerage and disbursement fees
Carriers might charge a brokerage and disbursement fee for their services. This charge is not included when charging duties and import taxes at checkout is enabled. If you need to charge your customers a brokerage and disbursement fee, then consider adding the cost of the fee to your shipping rates.
International shipping agreements
International shipping agreements are used in the transportation of goods between a buyer and a seller. These agreements determine who takes responsibility for the goods while they're in transit.
The following are the two most common agreements:
- Cost, insurance, freight (CIF). This agreement indicates that the seller assumes insurance and other costs until the goods are received by the seller.
- Free on board (FOB). This agreement indicates that insurance and other costs are assumed by the buyer as soon as the goods have been shipped.
Most countries and regions include shipping, handling, and insurance (CIF) when they determine whether a shipment is above duties and import tax thresholds. Others exclude these costs (FOB). If you're not sure which agreements are available to you, then contact your shipping carrier. The most notable countries and regions that do not include the costs for shipping, handling, and insurance are the following:
- The United States
- New Zealand
- South Africa
Ensure that you inform your customers of the shipping terms.
Minimum order value before duties and import taxes are applied
Not all orders are subject to duties and import taxes. Many countries or regions have a minimum order value called a de minimis, before duties and import taxes apply. The following table provides some examples of de minimis values.
|Country||Duty de minimis value||Tax de minimis value|
|United States||800 USD||800 USD|
|Canada||20 CAD||20 CAD|
|Mexico||50 USD||117 USD|
|Australia||1000 AUD||0 AUD|
|China||50 CNY||50 CNY|
|Hong Kong||0 HKD||0 HKD|
|Ireland||150 EUR||22 EUR|
|Japan||10,000 JPY||10,000 JPY|
|Sweden||1,600 SEK||300 SEK|
|Switzerland||5 CHF||5 CHF|
The de minimis is different for each country or region, and some have specific rules that affect the de minimis value depending on where the shipment originates. For example, goods that are shipped into Canada from Mexico or the United States are subject to duties if the goods are valued at $150 CAD or more, and subject to import taxes if the goods are valued at $40 or more.
If you're not sure what the de minimis value is for the country or region that you ship to, then check the website of that country or region's tax authority, or consult a local tax expert.