Let’s break down what you need to know to ensure your shipments always reach cross-border customers on time.
Import duty (or customs duty) is a tax collected by customs authorities on all goods sold across borders. The aim of import duties is to raise income for local governments - but also to increase the end price of the goods for consumers, thus encouraging them to buy from the domestic market, which is not subject to this tax. Common examples of import duties are trade tariffs and excise duties.
Import tax is a flat tax rate charged by customs on imports. In many cases, the tax is equal to the local sales tax. Even when the goods have been purchased abroad, this consumption tax will still apply when they enter a different country. Examples include sales tax and value-added tax (VAT).
Duties and taxes will impact the total cost of your shipment, so it’s important you are aware of them early on. You can then factor them into your pricing strategy to ensure your business remains profitable. Additionally, failing to manage duties and taxes properly could cause your shipment to be held up at customs – not to mention any fines you may have to pay.
Many countries have a minimum threshold of order value that goods have to meet before taxes and duties apply – this is called a de minimis.
The amount of tax and duties you’ll need to pay for a shipment are influenced by several factors, including:
A Harmonised System code is a unique identifier to classify the exact type of goods being shipped. The system is internationally recognised; the customs department of a country defines different regulations based on different classifications.
When you fill out a waybill for your international shipment, you will be required to enter the HS code(s) of the goods. Customs authorities will use this code to understand what is being shipped and apply the correct taxes and duties. If you include the incorrect code, you could end up paying the wrong rate – or worse, have your shipment rejected by the destination country. Thus, it’s important to get it right. Here’s a dedicated HS code guide to help you.
As international logistics experts, DHL Express has a range of solutions to help make things easy for businesses shipping cross-border. This includes a dedicated Landed Cost Estimator – a simple calculator that estimates duties, taxes, shipping costs, and more, to help you make better pricing decisions.
So, who is responsible for paying the import taxes and duties on a cross-border shipment? Here’s where it can get a little complex, so let’s break down the different parties and their responsibilities.
Carrier: this is the service that transports the shipment cross-border – for example, DHL Express. In international trade, the carrier acts as a customs broker, managing border documentation for clients so that their goods clear customs without any problems. The carrier is also responsible for collecting all associated import taxes and duties.
Exporter and importer: in the case of a cross-border, B2C e-commerce transaction, the seller sending the goods out of the country is the exporter, whilst the customer buying the goods is considered the importer. The party responsible for paying the taxes and duties passed on by the carrier is determined by an internationally recognised set of rules called Incoterms.
Incoterms are agreed between the exporter and the carrier. The two most common are:
It goes without saying that the latter is not so popular with customers. It may seem the cheaper option for your business, but can you afford to damage the customer experience in this way? Disgruntled customers won’t return!
Importer of Record: this is the individual or entity responsible for ensuring import compliance. They must manage all paperwork (such as licenses and certificates) needed for the import, as well as covering all duties and taxes. In the instance of DDP, for example, the seller is the Importer of Record.
Did you know that incorrect incoterms are a leading reason for shipping delays? That’s where partnering with the world’s international logistics experts can help!
There is a lot to plan for when shipping to a new cross-border destination, including:
When shipping goods internationally, you’ll be required to complete customs declarations forms, including a commercial invoice. This is a specialised export document containing comprehensive information about the goods that customs authorities will use to calculate the taxes, tariffs and duties due. You can cut costs by managing customs declarations yourself, or you can engage a customs broker.
Partnering with DHL Express, for example, will mean your business has access to a global network of customs experts across over 100 countries. You’ll benefit from:
Lastly, remember that whatever incoterms you choose for your international shipments, be clear about them to your customers upfront. Surprising them with high shipping fees at the very last moment is a sure way to lose the sale.
Managing taxes and duties for your international shipment may sound complicated, but with a DHL Express Business Account, it needn’t be. You’ll have expert guidance from customs specialists, whichever market you’re selling to. Grow globally with DHL.