Understanding Shipping Duties and Taxes

What are Incoterms?

Incoterms come from the phrase “International Commercial Terms”, and they are set by the International Chamber of Commerce (ICC) every 10 years. The current edition of these rules are from 2010.

These terms describe whether the sender or the receiver will be paying for duties and taxes.

Incoterms are beneficial because they are:

• Straightforward about the responsibilities of each party.
• Standardized.
• Accepted worldwide.

Valuation methods

To calculate the import tax and import duty amount for your shipment, multiply the taxable value of your shipment by your destination country’s tax and duty percentage.

Remember, import duty percentages vary for each category of goods – find out what the percentage is for your shipment on our Countries page.

The taxable value is usually based on the value of the goods, but depending on the valuation method of a country, it can also include other amounts.

There are two main valuation methods that countries use to determine taxable value: FOB and CIF.

1. FOB

   stands for “Free On Board”. In this case, the taxable value is the value of the product. While the definition also includes transportation loading, this only applies to items that are shipped by sea freight. If your shipment arrives by air freight (which most B2C eCommerce shipping does) it will not include the cost of transportation.

2. CIF

   stands for “Cost, Insurance, and Freight”. In this case, the taxable value includes the item value, cost of insurance (if any), and transportation to the final receiver.

Calculating custom duties and taxes efficiently

With over 220 countries in the world, how is it possible to ship worldwide if each country has different valuation methods? Doing manual calculations clearly isn’t a scalable solution.

To start, Easyship’s duties and taxes calculator is a great resource for getting estimates for your frequent shipping destinations.

Additionally, Easyship's platform automatically calculates duties and taxes for all international orders based on the category of your item and the country you’re shipping to. Learn more here.

USPS: Customs Charges Unavailable

Unfortunately, USPS does not provide DDP. The postage you pay simply covers the cost of transporting and delivering your parcel.

If you decide to move forward with using USPS for your dutiable international shipment, your customer will be responsible for handling any duties and taxes incurred, and will need to work with customs to settle any amounts owed.

DHL Express Customs Duties Process

At the time of publication, DHL Express has standard courier handling fee of $15USD* to process payments for DDP.

FedEx Customs Duties Payment

At the time of publication, FedEx has standard courier handling fee of $10USD* to process payments for DDP.

UPS Custom Tax

At the time of publication, UPS has standard courier handling fee of $15USD* to process payments for DDP.

*Please note that this fee may be different due to a variety of factors (such as shipment origin and more).

Preparing for custom duty and tax

To ensure a smooth shipping experience, it’s best to know the following before you start shipping internationally.

What is the custom duty and import tax amount for your shipment?

Every country has a tax threshold, which is the amount where a person begins paying taxes on an item. Custom duty may not apply to every international shipment, so it’s best to research the tax thresholds for each country you want to ship.

You can also use our import duty calculator to get a quick estimate.

Does your business need a customs broker?

A customs broker is well-versed in customs duties, rules, and regulations, and will ensure that your shipments will clear customs at both the country of origin and the destination country.

Businesses that send shipments to consumers don’t need a customs broker – the same applies if you ship with Easyship! However, B2B businesses that require large freight shipments to be sent overseas is recommended to work with one.

The customs clearance process

What happens when your shipment arrives in customs, and how does duties and taxes affect the customs clearance process?

To gain a better understanding, here’s what the customs clearance process looks like:

1. When your shipment arrives in the destination country, the customs officer will inspect your package and look at your paperwork. All international shipments require a commercial invoice; shipments with certain restrictions may have additional paperwork attached.

2. The customs officer will look at the value and category of your item on your commercial invoice. They can also check your website or crowdfunding campaign to make sure the item value matches what is on the commercial invoice – so please be honest on your paperwork! This will determine whether duties and taxes apply to your shipment.

   If the value is above the de minimis threshold (the amount at which duties and taxes will be charged) then duties and taxes apply.

   Next, they will see who will take care of the payment (the sender or the recipient).

3. If the shipment arrives with duties paid, it means the sender has handled payment, allowing it to be released for delivery. If the shipment arrives with duties unpaid, the recipient will need to handle it. Customs will hold the package, and the independent broker appointed by the courier will contact the recipient directly for payment.
4. Once payment for duties and taxes is received, the shipment is released and delivered.

How can I avoid charging taxes so I can remain competitive?

Not paying taxes is tax evasion, which we don’t encourage. It’s not worth risking your business getting fined. It’s best to know any import tax and custom duty amount that is applicable to your shipment, and being upfront with customers on pricing.

Can I declare my item as a gift to avoid custom duty?

No. Shipments are cleared through customs based on where it’s coming from, the item category, and value – not its purpose.

What happens if I under declare the value of my item?

Customs officers can easily check your business website and other sources to verify if the value listed matches the actual value of the item. Listing a lower value in order to avoid taxes is tax evasion and against the law.

When does the receiver pay for duties and taxes?

The courier used to ship the parcel (or an independent broker that the courier appoints) will contact the receiver directly to collect any applicable duties and taxes. These amounts need to be paid before delivery. The parcel will be held at customs until payment is received.

Is it better to use DDP incoterms or have the customer pay post-sale?

In our experience, we recommend pre-paying duties. It's very common for customers to be unaware that import duty even needs to be paid. If you ship DDU and the customer gets contacted by customs, it’s normally an unwanted surprise and at worse, they can choose to not pay and return the item.

Using DDP incoterms, and paying the small additional processing fees for this service by the courier, ensures that your shipment will clear customs and get delivered without having to bother your customer.

Is Easyship’s duties and taxes page up to date?

Yes - we stay updated on any changes that occur with each country, and maintain the pages accordingly!

How do I know Easyship’s categories are set with the correct HS code?

The categories on our platform incorporate a broad range of HS codes, ensuring that your item will be covered correctly.