How to Calculate Duties & Taxes for International Shipping

Learn about handling duties and taxes in international shipping to avoid unexpected costs and delays.
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Last update:

June 5, 2024

One of the most complex aspects of international shipping is dealing with duties and taxes. Regardless of what you’re shipping or where you’re shipping to, taxes are always a consideration and, frankly, not something to be taken lightly. In this article, we will detail the various tax issues you might encounter with international shipping and provide useful resources for further learning.

What Are Duties and Taxes?

Duties are fees levied on specific goods imported into a country. Each country imposes duties on imports that may compete with its domestic products. Taxes, on the other hand, are fees assessed on the overall value of the imported goods. Most countries refer to these taxes as Value Added Tax (VAT), and they have a standard VAT rate.

Duties and taxes are tools governments use to protect their economies and increase revenue. They not only affect the price of goods but also influence consumer and business decisions. For example, high duties can make imported goods more expensive, encouraging consumers to buy domestic products.

In international shipping, the calculation and payment of duties and taxes are typically managed by customs. Each country’s customs authority has its own rules and procedures for handling the duties and taxes on imported goods. Understanding these rules and procedures is crucial for successful international shipping.

When Might Packages Be Taxed?

Packages can be taxed under various circumstances. Here are some common scenarios:

Package Value Exceeds Duty-Free Thresholds

Each country has different regulations regarding the duty-free value of packages. If the package value exceeds this threshold, it will usually be taxed. For example:

  • European Union: €150
  • United Kingdom: £135
  • Canada: $150 CAD
  • Mexico: $50 USD
  • China: ¥50 RMB
  • More Countries

These thresholds are known as “De Minimus” values. Packages exceeding these values will incur duties and taxes. For instance, if you ship goods worth €200 to an EU country, you will likely need to pay duties and VAT.

Contents of the Package Are Goods, Not Gifts

Generally, gifts are not taxed. However, if the package contains goods meant for sale, they will be taxed. For example, sending a birthday gift to a friend is typically duty-free, but sending items for resale will incur taxes.

Type of Goods

Certain goods, such as electronics, luxury items, alcohol, and tobacco, are usually taxed even if their value is below the duty-free threshold. For example, the U.S. imposes high duties on imported alcohol and tobacco products, while duties on electronics are relatively lower.

Common Duties and Tax Surcharges

In addition to duties and taxes, international shipping may involve various surcharges. These may include:

  • Excise Tax: Typically applied to alcohol, tobacco, and fuel products.
  • Luxury Tax: Special tax on luxury goods.
  • Environmental Tax: Levied to protect the environment.
  • Customs Clearance/Entry Fees: Costs associated with processing import declarations.
  • Courier Handling Fees: Includes customs clearance fees, prepayment of duties and VAT on behalf of the consignee, airline handling fees, and security screening fees.

These additional charges can vary based on the package contents, value, and shipping method. For example, express courier services may incur higher handling fees, while standard postal services may have lower costs. Use this tool to calculate the possible duties and taxes due on international shipments.

Common Questions about Duties and Taxes

  1. What Is the De Minimus Rule?

The “De Minimus” rule refers to the minimum value under which no duties and taxes are applied. For example, in the EU, packages valued below €22 are typically exempt from VAT.

  1. When Must Duties and Taxes Be Paid?

Duties and taxes must be paid when the package is declared at the destination country’s customs. The package must be cleared before it can be delivered to the recipient.

  1. How Can Duties and Taxes Be Prepaid?

In some cases, the shipper can choose to prepay duties and taxes. For instance, when shipping from the U.S. to Canada using USPS First-Class Mail International, Priority Mail International, or Priority Mail Express International, you can prepay duties and taxes for a flat fee of $9.95.

  1. What Are DDP and DDU?

DDP (Delivered Duty Paid): The shipper prepays all duties and taxes, so the recipient does not have to pay extra upon delivery.

DDU (Delivered Duty Unpaid): The recipient pays the duties and taxes upon receiving the package.

By understanding these basics and related rules, you can better handle the tax issues in international shipping, ensure smooth customs clearance, and provide a better customer experience. If you have any questions or need further assistance, feel free to contact the ShipSaving support team.

We hope this article helps make your international shipping process smoother!

Written on:

June 5, 2024
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