Importing As a Small Business: Key Steps In Preparing For Duties and Taxes

Global trade and e-commerce are booming, creating new opportunities for small, independent businesses. Selling products internationally can be challenging, but it's not impossible. Small business shipping and taking care of duties and taxes can be tricky for businesses of any size, but especially for those who are just starting out. Keeping duties and taxes in mind, there are a few important things you should know before shipping your goods.

Get A Business Number (Canada) or Importer ID Number (US) 

You cannot avoid paying your duties and taxes, so knowing how to do it right is important. When preparing, you need to consider the legalities of the process. The initial step you are taking in your importing or exporting journey will be to ensure you have a valid business number. You can register for a business number with Canada Revenue Agency (CRA), and you will be issued a 15 digit number which you will use for tax purposes. The business number essentially identifies your business to the government, and allows you to collect or pay taxes for your business.

Once you have your business number you can register for up to five accounts; including payroll account, corporate income tax account, information return account, import/export account, and your GST/HST account. To get your business account or register for any of the other five accounts, you will need to fill out your RC1 Form. 

You will likely need to register for your import/export account and the  GST/HST account. Your GST/HST account serves the purpose of making it easier to report on or pay GST/HST you collect as a business.  According to the Canada Revenue Agency currently, you need to register for GST/HST account if you make taxable sales, leases or other supplies in Canada and you are not a small supplier. 

If you make less than $30,000 CAD over four consecutive calendar quarters, then you are a small supplier and do not need to register. Anything above that amount will lead to you having to register for  GST/HST account. A quarter is a period of three months beginning on the first day of January, April, July or October each year. You will then have to consider registering for an account if:

• You exceed $30,000 earnings in a single calendar quarter
• You exceed $30,000 earnings over the previous four of less consecutive quarters (but not in a single calendar quarter).

When importing into the US, you will need your Importer ID Number, which is issued by the Internal Revenue Service IRS) This number will need to be on your paperwork and will be required.  If you are a business based in the US, then you will need your Employer Identification Number (EIN) and your ITIN (Individual Taxpayer Identification Number).

Consider Hiring a Customs Broker

While you may be able to handle some business tasks yourself, in many cases you may need the services of a customs broker to ensure a proper import or export process, especially if this is your first time exporting or importing. A broker can help you stay within regulation ad make sure you do not miss any guidelines or laws.

Though they may charge a small fee for their services, brokers usually ensure compliance with laws and regulation, so that you don’t run into trouble later.  A customs broker can work to obtain release of your goods at customs, ensure duties and taxes are paid and prepare any other necessary paperwork and records, as well as communicate with customs on your behalf. 

Zipments offers a free Customs Broker Directory, for all relevant contact information on any Canadian broker and over 25 US brokers. 

If you plan on importing goods or find that your customs clearance is taking too long, you will need to know who to reach. Zipments broker directory includes all the information you may need, including:

✔️Broker Website
✔️Address
✔️Phone/Email/Fax number
✔️Customs Brokers Agent Used At Each Port
✔️After Hours contact information

Estimate Your Duties, Taxes or Fees

An integral step in ensuring your business runs smoothly is to calculate your costs ahead of time, and determine how costly the process will be.  In order to determine taxes or duties you will owe, you will need to know the tariff classification for your goods, current applicable duty rates, and any tax regulations. If your goods qualify for preferential duty treatment, then you will need to present documents to customs in order to apply this to your goods. Your customs invoice will contain the tariff classification for your goods, through which customs will determine the duties or taxes you will need to pay on your shipment. 

If you are importing into Canada, you can use the Zipments Duty and Tax Calculator. All you need to do is input your item details, and you will receive an accurate estimate of your duties owed. 

Generate Your Customs Invoice

A customs invoice is a key document when importing or exporting, and you will need one for each type of product you are importing, as well as multiple copies of this invoice. Your customs invoice will be essential, because your classification or tariff will have to be included on your invoice. Customs uses your invoice to assess for duties and taxes, based on the classification provided. A good customs invoice will contain information on the shipper, receiver, carrier and the goods. A customs invoice is usually more detailed than a regular commercial invoice, so you will need to include enough information. Some of the key information which should be on your invoice includes

• Country of Origin
• Total Value or Price
• Unit Price
• HS Code
• Detailed Description of Goods
• Addresses and Names of Shipper and Consignee
• Quantity and Weight of Goods
• Invoice Number 

Zipments has modernized the way you create customs invoices.  With easy to fill out templates, and the latest technology, you can complete your customs invoices in less time, for free, with more accuracy. The Zipments customs invoice forms include:

✔️ CBSA and CBP Approved Templates

✔️AI Technology Generates The Tariff For You 

✔️Easily Transmitted To Your Carrier or Broker 

Create Your CCI:

Create Your US Customs Invoice:

Find The Right Carrier

Once your paperwork and planning is complete, you will want to consider hiring the right carrier for your business. Carriers will be in charge of safely transporting your goods, as well as helping ensure your goods clear customs. It is important to find a carrier which fits your needs, rather than choosing the cheapest option possible.

Procure Your Goods

In order to obtain your goods, customs will need to release them, and this usually involves payment of your duties and taxes. You sometimes do have the option of paying for duties and taxes at customs, before your goods are released, or get the goods released prior to payment of duties, by completing the relevant paperwork. In some cases, if the goods are shipped DDP (Delivery Duty Paid), then you will be able to obtain your goods, since the seller will assume responsibility for payment of duties and taxes, due to a predetermined agreement between buyer and seller.  However, all documentation and agreements need to be determined ahead of time, so you need to understand who will bare the responsibility of paying duties and taxes, in order to avoid any surprises. 

You may also need to determine if you will need a customs bond. If importing to the US and your imported goods are valued over $2500 USD then you will also need to obtain an import bond. This customs bond can be purchased from an insurance or surety company that is licensed by CBP.  It is beneficial to look into duty deferral programs relevant to you, as this may allow for the storing of goods in bonded warehouses.

There’s a lot to consider when getting your goods into the hands of customers. This year, more than ever before, it's important to be prepared for all of the duties and taxes that could affect your business.  When you use Zipments for your customs clearance, you can take the hassle out of customs clearance and focus on growing your business. Get your goods across borders in less time, with less hassle.