Collecting international duty and import taxes

If you ship internationally, then your customers might be charged additional duties and import taxes when they receive their shipments.

Your choices of how to manage duty and import taxes are called international commerce terms, or incoterms. 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 VAT and duties. 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 VAT, duties and clearing fees, upon delivery. Some shipping carriers charge additional fees for collecting duties upon delivery if the duties haven't been paid up front. Therefore, using the DAP (or DDU) incoterm might result in additional charges to the customer.

To help your customers avoid additional fees, you can charge any applicable duty and import taxes in your checkout. Your carrier will later invoice you for duty and import taxes, which you can then pay with the fees that you collect from your customer.

Collecting duty and import taxes at checkout

You might be able to collect duty and import taxes in your store's checkout if your store meets the following requirements:

Contact Shopify Support to learn more about the beta program. If your store doesn't meet the requirements to be included in the beta, then you can use a third-party app to calculate duty and import taxes.

After you enable collecting duty and import taxes in the checkout, you can print DDP shipping labels to indicate that the duty and import taxes have already been paid by the customer. Make sure to indicate DDP on your commercial invoices as the incoterm of delivery. If you ship an order with $0 collected in duties, then you should still use a DDP shipping label and indicate DDP on the commercial invoice to ensure that your customers aren't liable for any additional charges.

Considerations for collecting duty and import taxes at checkout

Before you collect duty and import taxes in your checkout, review the following considerations.

Compatibility with other Shopify features

  • Some checkout customizations might conflict with collecting duty and import taxes. If you've customized your checkout, then review your customizations before you enable the duty and import taxes feature.

Tax settings

  • The duty and import taxes feature isn't compatible with tax overrides or manual tax rates. If you have any tax overrides or manual rates, then they only apply to sales within your region. Overrides and manual rates for international sales are overridden by the duty and import taxes feature.
  • If you enable the duty and import taxes feature and disable it afterwards, then your previous tax settings are restored.
  • The collection of duty and import taxes might affect your tax setup.
    • If your store uses registration-based taxes, then taxes such as VAT or sales tax are collected on international orders only if you enable collecting duties and import tax for that country or region. If you need to collect taxes on international orders in that country or region, then you must also enable collecting duty and import taxes. Tax registrations are not used if you ship using the DDU/DAP incoterm for such countries or regions.
    • If your store uses location-based taxes, then taxes such as VAT or sales tax are not collected on international orders. Collecting duty and import taxes aren't compatible with manually entered tax rates.

Shipping requirements

  • When you collect duty and import taxes at checkout, you can only set up a country or region to use either DDP or DAP/DDU. You can't offer both incoterms to buyers in the same country or region.
  • Shopify Shipping does not support DDP.
  • Not all carriers support DDP shipping labels, and some support them for only certain destinations. Contact your shipping carriers to find out if, and where, they support DDP shipping labels.
  • You can't collect duty and import taxes in the Rest of world shipping zone. To collect duty and import taxes for a country or region, add it to an existing shipping zone or create a new one.
  • The Shopify Fulfillment Network does not support collecting duty and import taxes in the checkout.

Duties and import tax estimates

  • The duty and import taxes that are charged are estimates based on the latest information at the time that the customer places their order. Additional duties might be charged for different reasons, such as incorrect duties paid or incorrect HS codes.
  • Brokerage and disbursement fees are not included in duties and import tax calculations. If your contract with a carrier does not include waived disbursement fees, then consider adding the cost of the fees to your product prices or your shipping rates.

Countries and regions that don't support charging duty and import taxes

The following countries and regions are not supported for charging duty and import taxes. You can't collect duty and import taxes in these regions.

Africa

  • Republic of Cabo Verde (CV)
  • Republic of the Sudan (SD)
  • Republic of South Sudan (SS)
  • Federal Republic of Somalia (SO)

Antarctica

  • South Georgia and the South Sandwich Islands (GS)

Asia

  • Republic of Iraq (IQ)
  • Syrian Arab Republic (SY)
  • Democratic Republic of Timor-Leste (East Timor) (TL)
  • Turkmenistan (TM)

Europe

  • Northern Ireland (XI)
  • Russian Federation (RUS)

Oceania

  • Federated States of Micronesia (FM)
  • Republic of the Marshall Islands (MH)
  • Republic of Palau (PW)

North America

  • Territorial Collectivity of Saint-Pierre and Miquelon (PM)
  • Commonwealth of Puerto Rico (PR)

South America

  • Federative Republic of Brazil (BR)
  • Falkland Islands (FK)

Collect duty and import taxes at checkout

Duty and import taxes will be charged on international orders after you enable the collection of duty and import taxes. Orders placed from regions where you have a fulfillment location will not be affected.

Steps:

  1. Add region of origin and HS codes to your products.
  2. From your Shopify admin, go to Settings > Taxes and duties.
  3. In the Duty and import taxes section, click Set up.
  4. Check the countries and regions that you want to collect duty and import taxes for.
  5. Click Set up.

Pricing

  • A 0.85% transaction fee applies to orders that have duty and import taxes calculated in stores that use Shopify Payments.
  • A 1.5% transaction fee applies to orders that have duty and import taxes calculated in stores that use other payment providers.

The transaction fee is applied for every order that has duty and import taxes calculated, even if the calculated amount is zero. Transaction fees are not charged in the following cases:

  • Orders that are shipped to the same country or region as where the store is located.
  • Orders that are shipped between EU member countries.
  • Abandoned checkouts.

Duties calculation

For each order, duty and import taxes are calculated based on the shipping destination, each product’s country of origin, and each product’s HS code.

If a product doesn't have an HS code, then make sure to specify a product type. If a product in an order doesn't have an HS code or product type, then duty and import taxes won't be calculated on that order even if you've set orders from a country or region to collect duty and import taxes.

Duties calculation on free items

When you offer free products or samples to customers or run a Buy X and Get Y (BOGO) sale, then some items in the shipment have no cost associated with them. For the calculation of duty and import taxes, items can't have a $0 declared value. To calculate the duty and import taxes for Buy X and Get Y discounts where the second or third item is free, the cost of all items is split evenly across all items. For example, if one shirt is $100 and the second shirt is free, then each shirt is represented as costing $50 to calculate the duty and import taxes. When there are free products or samples in the shipment, then the free item is represented as costing $1, and the $1 price is deducted evenly from every other item in the shipment. For example, if a shipment has five items and one of the items is free, then the free item is represented as costing $1, and $.25 is deducted from the price of the other four item in the order.

Orders that are subject to duty and import taxes

Not all orders are subject to duty and import taxes. Many countries have a de minimis, a minimum order value, before duty and import taxes apply.

For example, goods that are shipped from Mexico or the United States into Canada 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 you're shipping to, then check the website of that country or region's tax authority, or consult a local tax expert.

Tasks to consider after you enable duties and import tax collection at checkout

After you enable duty and import tax collection at checkout, consider performing the following tasks:

Purchase and use DDP shipping labels

After you start charging duty and import taxes at checkout, you must purchase and use DDP shipping labels instead of standard shipping labels for your international orders. If you charge duties at checkout, but use a standard shipping label, then your customer is still be charged duty and import taxes at delivery, which means that your customer pays for the duty and import taxes twice.

When duties are collected on an international order, a Duties line item is included in that order’s details. Verify that duty and import taxes have been collected on each international order before you purchase a DDP label. If you ship an order with $0 duties, then you can use DDP shipping labels to ensure that your customers aren't liable for any additional charges. If there was an error at checkout, then duty and import taxes might not have been collected, and you should use a standard shipping label for that order.

Creating commercial invoices

Every international order requires a commercial invoice. You can fill out digital commercial invoices provided by the carrier on the carrier’s website. Depending on the order, you need to handle the commercial invoice in either of the following ways:

  • If the order has paid duty and import taxes, then mark the terms of delivery on the commercial invoice as DDP to indicate that duty and import taxes have been paid.
  • If the order does not have paid duty and import taxes, then mark the terms of delivery on the commercial invoice as DDU or DAP to indicate that duty and import taxes have not yet been paid.

Updating your shipping policy and notifications

After you enable duty and import taxes at checkout, update your shipping policy and your notification templates so that your customers are aware of your policies and charges for international sales.

Update your shipping policy in your Shopify admin by going to Settings > Policies.

If you use the default Order confirmation and Order refund email templates, then your emails are automatically updated to include a Duties line item and you don't need to make any changes. If you have customized your Order confirmation and Order refund email templates, then you can add code to your notification templates to add a Duties line.

Preparing for flash sales

If you run flash sales, then consider disabling the collection of duty and import taxes until your sale is complete. If you decide to collect duty and import taxes during your sale, then review your sale products to verify that they have HS codes, country or region of origin, and product type specified. Ensuring that you have these fields filled out on your sale products helps to estimate duties and import tax costs.

Managing refunds

It's up to you how you want to handle refunds for duty and import taxes.

If you decide to offer refunds for duty and import taxes, bear the following in mind:

  • If you refund an order that hasn’t been fulfilled yet, then you can still refund the duties.
  • If you refund an order that has already been fulfilled, you can refund the duty and import taxes to the customer. Any funds that have been used to purchase DDP labels will not be returned to you by the carrier.

Keep in mind that refunding the order in full is the only way to prevent an order dispute.

Use a third-party app to calculate duty and import taxes at checkout

If your store doesn't meet the requirements for charging duty and import taxes at checkout, then you can use a third-party app from the Shopify App Store to display an estimate at checkout of the duty and import taxes for the order. These apps use your product details, such as the country or region of origin and HS code for a product, to calculate duty and import taxes. Third-party apps might charge you additional recurring or transaction fees.

Steps:

  1. Add country or region of origin and HS codes to your products.
  2. Install an app from the Shopify App Store that calculates duty and import taxes.

Some apps might require additional setup steps. If you need help getting started, then refer to the apps's page in the Shopify App Store, or contact the app's developer for assistance.

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