Understanding Duties, Fees and Taxes In Shipping

If you're starting a business or growing an existing one, international shipping can be a challenge. For any shipment that you make, there are a number of rules and customs regulations to follow. Understanding customs rules will make sure you don't get hit with unexpected charges. However, all commercial goods will likely be subject to paying certain fees at customs, in accordance with each country’s import laws. When shipping goods into United States and Canada, it is essential to understand the duties, tariffs and taxes one may need to pay, in order to avoid issues. 

When shipping internationally, it's important to consider all of the fees a shipment may incur. In the process of importing, you will have to pay fees, which differ based on the goods you are shipping, where the goods are from and the country you are importing into. Clearance charges, duties and fees as well as transport costs are essential to account for in a budget. Duties and taxes are some of the most common fees which will require payment on their journey through customs. The fees will differ based on the shipment, and will impact the cost of shipping overall. 

Duties, Tariffs and Taxes

Duties is the name for fees that governments will impose on goods which are imported into their country. The reason any of these fees and taxes exist is to help provide a source of revenue for the government, while also protecting the domestic industry within said country. Duties are determined based on a number of factors, including the country where the goods originated from and what type of goods they may be.

Tariffs are trade based fees imposed by governments based on a number of factors, including the type of product and the time period in which it is being imported. Tariffs are not the same as duties, though similar. They are determined by the government and are subject to change often,  due to governments wanting to  impose restrictions to foreign countries, which is why getting the correct tariff or HS Code on your invoice is essential.

Taxes are the fees which are charged for shipments, separate from duties, on any goods entering the country. There are usually different forms of taxes which can be imposed, such as GST (Goods and Services Tax), HST (Harmonized Sales Tax, or combination of GST and PST), a sales tax or value-added tax (VAT). Certain provinces in Canada may also impose a PST, which is a provincial sales tax. Taxes are determined dependent on the type and value of the goods, as well the country of origin.

Customs Valuation

You may want to familiarize yourself with a customs valuation, which is the process in which the value of goods is determined using a fair and unified method. Customs officials usually use the transaction value method to determine the value of the goods, and this is primarily going to be based on the documents provided by the importer, which further emphasizes the importance of paperwork. The valuation method will provide a foundation with which the fees or taxes will be determined for the shipment, as fees are a percentage of the customs value usually.

How Are Duties and Fees Calculated 

Customs officials will often assess the taxes and duties a shipment owes based on the information which is contained on the commercial or customs invoice and other shipping documents. In order for goods to be released from customs, the duties and fees usually need to be paid. To determine fees and duties, customs will consider the following factors:

• Country of Origin
• Goods Declared Value
• Any International Trade Agreements Which Apply
• The Country’s Own Regulations
• Tariff or HS Code
• Type of Product and It's Uses

If you are importing into Canada, you can use the Zipments Duty and Fee Calculator, in order to get an accurate estimate of the fees you may expect before your goods clear the border. The calculator automatically assesses your shipment and gives you an accurate representation of the amount you may owe for your shipment. 

Creating a Customs Invoice

Your customs invoice or commercial invoice is one essential document which will be required in order for goods to clear customs. The invoice contains relevant information about the type of goods, their declared value and HS Code or tariff for the goods. In order to clear customs with ease, it is important to complete the invoice correctly.

Zipments has created easy to navigate customs invoice forms, with AI technology automatically generating the accurate tariff code for your goods. You can access a Canada Customs Invoice and US Customs Invoice at Zipments.io and complete your documentation within minutes. We help shippers avoid additional charges by understanding their customs obligations and helping them navigate the confusing system.

Customs regulations are complex and constantly changing. Customs clearance is a complicated process and there are many instances where inaccurate information can lead to delays and unexpected charges. As a shipper or importer, it's your responsibility to know about any fees and taxes before deciding to ship goods to a certain destination. In order to avoid penalties or delays, understanding your duties, fees or taxes is integral in the budgeting for your business.