A customs duty is a charge imposed on certain goods crossing a border, usually imports. Taxes are a broader category and can include import VAT or GST, which may be charged in addition to duty.
Shipping internationally for the first time? Depending on what you’re sending and where it’s going, your shipment may be subject to duties and taxes when it crosses the border.
So, what’s the difference? Tariffs are the rates governments set on certain goods traded internationally. Duties are charges applied to goods based on those rates. Taxes, such as VAT, are additional charges that may apply when goods enter a country.
Understanding these costs can help your business avoid unexpected bills and keep shipments moving smoothly. Here's what duties and taxes mean, how they're calculated, when they apply and who pays them.
What are duties and taxes?
Although the terms are often used interchangeably, duties, taxes and tariffs have slightly different meanings in international trade.
Duties
Customs duties are charges governments impose on certain goods crossing their borders, most commonly imports. The amount payable depends on factors including the product's value, classification and country of origin.
Duty rates vary significantly between countries and products. Some goods attract no duty at all, while others may be subject to rates of 30% or more. There's no single global rate, which is why checking the requirements of your destination market is so important.
Taxes
Taxes are a broader category of government charges. In international shipping, they commonly include import VAT in countries such as the UK, and Goods and Services Tax (GST) in Australia and Singapore.
These taxes may apply in addition to customs duties. The applicable rate, calculation method and any exemptions depend on the destination country's rules.
Tariffs
You've probably heard about tariffs in the news, particularly when governments announce changes to international trade policy.
A tariff is generally a duty imposed on imported goods, although the term can also refer to the schedule of rates governments apply to different products.
In everyday conversation, tariff and customs duty are often used interchangeably. The distinction is mainly one of context: tariffs are frequently discussed in relation to trade policy, while duties describe the charges assessed on individual shipments.
How are import duties and taxes calculated?
There's no universal formula for calculating import duties and taxes. Each country has its own rules, but several key factors determine how much your shipment may cost.
Key factors that affect your rate
- Declared value of goods: Duties are often calculated as a percentage of the shipment's customs value. Depending on the destination's valuation rules, this may include the cost of goods, freight and insurance.
- HS codes: Harmonized System (HS) codes classify goods for customs purposes. The first six digits are internationally standardized, while countries may add further digits to determine their specific tariff rates. Using the wrong code can result in incorrect charges or customs delays.
- Country of origin: This is generally where goods were produced or substantially transformed, rather than simply where they're shipped from. Trade agreements may reduce or eliminate duties for qualifying goods, sometimes requiring proof of origin.
- Type of goods: Clothing, electronics, food and industrial materials can all attract different duty rates. Some products may also be subject to additional taxes or trade measures.
For help calculating your costs, try DHL Express’ free My Global Trade Services (MyGTS) tool. It can help you identify the correct HS codes for your goods, estimate import duties and taxes, and understand customs requirements before you ship – so you can plan ahead with greater confidence.
When do duties apply?
Whether a shipment attracts customs charges depends on what you're sending, its value, its destination and the applicable customs rules.
Dutiable shipments
Dutiable shipments contain goods that may be subject to customs duties when imported into a country. Examples include:
- Products sold to international customers
- Gifts exceeding the destination country's duty-free allowance
- Commercial samples that don't qualify for an exemption
Importantly, having commercial value doesn't automatically mean duty is payable. Some products have a 0% duty rate, while others may qualify for relief under a trade agreement or specific customs exemption.
Non-dutiable shipments
Non-dutiable shipments generally include documents without commercial value, such as ordinary letters, contracts and business correspondence.
However, different countries have different rules about what qualifies as a document rather than a product. Printed materials intended for sale, for example, may be treated differently from routine business paperwork.
When dealing with international shipping duties and taxes, always describe your shipment accurately and check the destination's requirements. If you're unsure, DHL Express' customs team can help you understand the relevant clearance process.
What happens at customs?
Every international shipment must meet the customs requirements of the countries it enters. Here's how the clearance process generally works.
The customs clearance process
Step 1: Arrival and presentation
When your shipment reaches its destination country, it must be presented to the relevant customs authority. With express services, customs information can often be submitted electronically before the shipment arrives, helping clearance begin earlier.
Step 2: Documentation checks
Customs authorities review the shipment information, including the Commercial Invoice, waybill and any other required documents. They'll check details such as the goods description, declared value, HS code and country of origin.
Step 3: Duty and tax assessment
Based on this information, customs determines whether duties and taxes apply and calculates the amounts payable. Additional checks may be required for certain products.
Step 4: Payment and release
Where charges are due, they must be settled or otherwise accounted for under the applicable customs arrangements before the shipment can be released for delivery.
Incomplete or inaccurate paperwork can delay this process. Providing clear product descriptions, correct values and the necessary documents from the outset helps reduce the risk of problems.
Who pays duties and taxes?
One of the most important decisions when shipping internationally is whether your business or your customer will pay the import charges.
The answer depends on the agreed shipping terms, including any applicable Incoterms, and the billing arrangements with your carrier.
DDP vs DDU
DDU (Delivered Duty Unpaid)
Under a duty-unpaid arrangement, the receiver is generally responsible for paying import duties and taxes. DHL Express may contact the receiver to arrange payment before the shipment is delivered.
DDU is an older shipping term. The closest current Incoterms rule is DAP (Delivered at Place), although the two aren't identical.
For an e-commerce business, this approach can mean lower upfront shipping-related costs. However, customers should be told clearly about any charges they may need to pay on arrival.
DDP (Delivered Duty Paid)
Under DDP, the seller takes responsibility for import clearance and applicable duties and taxes, as well as the other obligations specified by the agreed terms.
This can create a more predictable delivery experience for customers, who won't face an unexpected import duty or tax bill at the door.
DHL Express also offers a Duties and Taxes Paid (DTP) billing option for eligible account holders, allowing import charges to be billed to the shipper rather than the receiver. This is a carrier billing arrangement, not an Incoterms rule.
With a DHL Express Business Account, you can access international shipping services and customs support to help manage cross-border deliveries more confidently.
Duties and Taxes FAQ
A tariff is a duty imposed on imported goods or the schedule of rates used to calculate those duties. The term is often used when discussing government trade policies.
Check the destination country's customs tariff using your product's HS code and country of origin. The applicable rate may also depend on trade agreements or other special measures.
This depends on the agreed shipping terms. Under DDP (Delivered Duty Paid), the seller generally pays, while under DAP (Delivered At Place), the buyer is typically responsible for import duties and taxes.
Yes. You can estimate charges using the product's HS code, customs value, country of origin and destination country's tariff and tax rules. Final amounts are subject to customs assessment.
Ship internationally with customs confidence
Understanding duties and taxes is one thing. Navigating them smoothly is another. With a DHL Express Business Account, you’ll benefit from expert customs support and reliable international shipping to help your business move seamlessly across borders.
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