Customs authorities collect duties and taxes on goods coming into and out of a country. Find out the difference between duties and taxes, what they’re based on and how they’re calculated.
When it comes to shipping, the terms 'duties' and 'taxes' can be easily confused.So first it's important to understand what they actually mean.
The key difference between taxes and duties is that duties are a type of tax on goods entering or leaving a country, while taxes are charges placed on almost all purchases. Both contribute to the total import and export costs of a product.
The amount of duties and taxes you need to pay for a shipment are determined by several factors:
Customs authorities use the information on your commercial invoice and other relevant documents to determine the duties and taxes. That's why it's essential to include details like the HS code and an accurate goods value on your commercial invoice.
And bear in mind, if you’re missing information, you’re leaving it up to customs to calculate the duties and taxes on your shipment, which may result in you paying more than you should.
First, you need to determine the duty percentage rate on the goods you're shipping. This rate varies depending on the country you're shipping to.
To find it, visit the customs or trade tariff page on the government website of your destination country. You can usually search for duty rates using an HS code or product description. For example, the duty percentage, or trade tariff, rate on a woman's T-shirt entering the UK from the US is 12%.
Once you have found the rate, you can calculate the duty on your shipment. To do this add up the value of the goods, freight costs, insurance and any additional costs, then multiply the total by the duty rate. The result is the amount of duty you'll need to pay customs for your shipment.
Some countries use different rate calculation methods so remember to check this on the government website or with your carrier.
First, you need to find out the sales tax (VAT) rates of the country you’re shipping to. For example, the UK has three VAT rates: 0%, 5% and 20%, which is the standard rate for most goods and services. In the case of shipping a woman's T-shirt to the UK, it’s 20% because clothing for adults falls under the standard VAT rate.
To calculate the VAT on your shipment, add up the goods value, freight costs, insurance, import duty and any additional costs. Then multiply the total by the destination country's applicable VAT rate. The result is the amount of VAT you'll need to pay customs for your shipment.
You usually have to pay them before your goods are released from customs in the destination country. Your carrier may be able to pay on your behalf to ensure your goods are released quickly – and they’ll invoice you for the charges. It’s worth double-checking if they can do this before shipping.
When sending goods internationally it's important to have a complete understanding of a shipment's total costs (also known as landed costs). Other charges that apply to your shipment along the way can include:
To find out more, ask your carrier for advice, or browse the customs website of the country you're shipping to.