Customs clearance: How do I calculate import duties and taxes?

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Understanding the ins and outs of international shipping can be challenging, especially when it comes to duties and taxes. If you've ever found yourself perplexed by these charges or uncertain about how they are determined and paid online, you're certainly not alone. 

Knowing how these charges work is more than just a necessity – it's integral to conducting successful international business. Not only does it contribute to precise cost estimation and pricing strategies, but it also ensures compliance with international trade regulations. Furthermore, having this knowledge can act as a safeguard, preventing unforeseen complications or delays in the shipping process, and ultimately, protecting your bottom line.

This guide will walk you through how these charges are calculated and how you can pay them online. 

Understanding customs duties and taxes

Duties and taxes are essentially financial obligations incurred by your imported shipment upon crossing international borders. They're a common part of international trade, designed to serve dual purposes: revenue generation and protection of domestic industries. Duties and taxes, although often mentioned together, serve different purposes and are governed by different regulations.

  • Duties, tariffs or customs duties – This is primarily imposed by the customs authority of the destination country. The purpose of duties is to protect domestic industries by making foreign products more expensive, thus encouraging consumers to buy domestically produced goods.
  • Taxes – This is a crucial source of revenue for governments. They come in various forms, including Value Added Tax (VAT), Goods and Services Tax (GST), or sales tax, depending on the country. These are typically imposed on the total value of the goods. 

How are duties and taxes calculated?

When it comes to determining these costs, several factors come into play:

1. The value of the shipment

The total value of your shipment forms the foundation for calculating duties and taxes. This declared value comprises the cost of goods, insurance cost, and freight charges, collectively known as CIF (cost, insurance, and freight). For instance, if you're shipping a batch of handwoven silk fabric valued at US$1000 from Thailand to the US, and you've spent US$200 on insurance and US$300 on freight charges, the declared value would be US$1500. This is the total CIF value. It is this amount that customs will use to compute the payable duties and taxes.

2. The nature of goods 

The type of goods you're shipping also plays a crucial role in the calculation of duties and taxes. Every product has a specific rate at which duties are charged. This is because certain goods may be subject to higher duty fees to protect domestic industries, encourage local production, or control the import of specific goods due to social, health, or environmental reasons. For instance, if you're exporting high-end electronics, they might attract higher duties than a shipment of books.

In tandem with the nature of goods, the Harmonized System (HS) code, a universal classification system, significantly impacts these calculations. 

The role of the Harmonized System (HS) code

The HS code, a creation of the World Customs Organization (WCO), is a system used by over 200 countries for taxation, statistics, policy-making, and more. This six-digit code accurately identifies a specific product and determines its applicable duty.

This code operates in a structured manner. Here's how it works: the first two digits represent the product category, the next two pinpoint the group within that category, and the last two specify the product even further. For example, if you’re shipping precious stones from Thailand to Japan, you must first take note of the HS code of this particular product. In this case, it’s 710300. Countries can append extra digits for more precise classification. Japan, like many countries, uses a more detailed system, expanding the HS code to up to 9 or 10 digits.

Navigating HS codes is critical for determining import tariff duty rates, achieving smooth customs clearance processes and avoiding delays or penalties for misclassification. Here, a logistics partner like DHL can provide invaluable assistance, ensuring your goods are correctly classified.

4. Country of origin

The country where the goods are manufactured or sourced, also known as the country of origin, can affect the duties and taxes due. For instance, if a free trade agreement (FTA) exists between the country of origin and the destination country, the goods may be eligible for reduced or zero duty rates – allowing your business to cut down on shipping costs.

Let's take the example of shipping precious stones from Thailand to Singapore. As part of the ASEAN Free Trade Area (AFTA), tariffs are eliminated, meaning virtually all products can enter Singapore from Thailand with zero import duties. A trusted logistics partner like DHL Express can provide the necessary guidance and support, ensuring your international shipping process is as smooth and hassle-free as possible.

Calculate duties and taxes with DHL Express

Non-payment of duties and taxes can lead to several complications, including delayed shipments, penalties, or even confiscation of the shipment by customs authorities. Hence, it's crucial to factor in these costs in your shipping budget when importing and exporting goods to avoid such consequences.

When shipping with DHL Express, you can calculate your total shipping costs including customs duty, tax, and other import fees with our Landed Cost Estimator. Empower your business with the ability to make informed pricing decisions and boost profits by knowing the full financial implications of international shipping between countries. 

Duties and taxes: Who's responsible, DHL Express or me?

DHL Express, as your logistics partner, assists in this process by advancing the payment of duties and taxes on your behalf at the time of import at a small administrative fee. Upon receipt of an email or SMS notification from DHL Express regarding unpaid duties and taxes, customers have several payment options: they can settle the amount through bank transfer, FPX payment, or pay in cash upon delivery.

Alternatively, DHL Express’ Advance Duty Collection (ADC) portal allows you to pay these charges online using a secure payment platform. This service is designed to simplify the payment process and ensures your shipment clears customs quickly and efficiently.

Why is DHL Express charging for Duty Tax Receiver Fee?

In order to facilitate the payment of duties and taxes on behalf of customers, DHL Express imposes a nominal Duty Tax Receiver Fee. This is charged based on a minimum rate or a percentage of the advanced or guaranteed fiscal charges. This fee covers the administrative expenses associated with the transaction and helps maintain the efficiency and reliability of our service.

DHL Express also offers these duty billing services: 

  • Duty Tax Paid: DHL clears and bills import duties and taxes to a specified DHL account at the shipment's origin or a third country, at the customer's request. An extra fee is charged based on a flat rate or a percentage of the fiscal charges paid.
  • Duty Tax Importer: At the customer's request, DHL clears the shipment and bills any duties, taxes, and regulatory charges to the importer's specified DHL account at the destination. An extra fee, based on a flat rate or a percentage of the advanced fiscal charges, is applied. 

Achieve customs clearance for your shipments with DHL Express now 

Understanding how duties and taxes work is an integral part of successful international shipping. It helps ensure smooth customs clearance, timely delivery, and, importantly, no unexpected costs. DHL Express is committed to guiding you through this process and providing the necessary tools and services to make international shipping hassle-free. 

Simplify the process of checking rates and creating shipments with MyDHL+, our integrated shipping platform. Create a DHL Express business account now to start shipping internationally.