Shipping Shock: How To Avoid Eye-Popping Duty and Tax Bills
Duty and taxes, not something many people like the sound of. But, in the shipping world, you’re going to hear it a lot, so get used to it.
When shipping goods internationally, you should be prepared to pay duties and taxes, because most goods shipped across international borders will be subject to them.
What Are Duties And Taxes?
Duties and taxes are imposed by the importing country’s government to generate revenue, and protect local industries against foreign competition.
A shipment’s duty and tax amount is usually based on a number of different things: the value of the goods, the trade agreements between the countries, the country where the goods were manufactured, the use of the product, and the product’s Harmonized System (HS) code.
There are tools like www.dutycalculator.com, to help you estimate your charges for duty and taxes for yourself and your customer.
Shippers are always looking to save a few bucks and find ways — legal and illegal — to work around these charges, like sending to a personal name over a business name, valuing the goods lower than they actually are, choosing one carrier over another, or shipping goods as gifts.
At ShipTime we don’t advise anyone to act falsely or fraudulently when shipping. We believe, as the old saying goes, that honestly is the best policy and duty and taxes can’t and shouldn’t be avoided.
There are certain instances in shipping however, when you are exempt from duties and/or taxes.
In The United States, duty is not charged if the value of mail items is less than $200 US.
In Canada, duty is not charged if the value of mail items is less than $20 CDN except on intoxicating beverages, cigars, cigarettes, manufactured tobacco.
Also in Canada, gifts valued at $60 CDN or less are exempt from duties and taxes.
Items that do not qualify as gifts include: tobacco, intoxicating beverages, advertising material, and items sent by a business to a consumer in Canada and vice versa.
There are also other exemptions.
Duty may not apply to certain products manufactured in North America. NAFTA, The North American Free Trade Agreement exempts products that are wholly made in the US, Canada or Mexican. But to receive these exemptions, the shipper must produce certificates of origin to demonstrate that the goods qualify as NAFTA-produced. These goods however, in most cases, are still subject to the Goods and Services Tax (GST).
It’s a wild world in the land of duties and taxes, but if you’re prepared, it will be easier to tame the beast.