Parties responsible for import taxes and duties
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 recognized set of rules called Incoterms.
Incoterms are agreed between the exporter and the carrier. The two most common are:
- Delivered Duty Paid (DDP). This is when the seller takes responsibility for the transportation of the goods (including the associated fees), and paying all import taxes and duties due when the shipment crosses borders.
- Delivered Duty Unpaid (DDU). In this instance, the seller is responsible for delivering the goods to their destination and the cost of their transportation, but the customer must pay all associated import taxes and duties to the carrier when they receive the package.
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.