Learn about customs duties and taxes for international shipping, how they are applied in the shipping process and what the customs clearance process looks like.
Topics in this article:
- Reasons behind customs duties and taxes
- VAT in the UK and EU
- Delivered duty paid vs. delivered duty unpaid
- Customs clearance process
Reasons behind customs duties and taxes
When shipping internationally to your customer, you or your buyer may be asked to pay additional duties and taxes before the shipment is delivered.
Governments apply these fees on imported goods to:
1. Protect domestic businesses from foreign competition
2. Have control of the flow of certain products
3. Raise revenue
Duties and taxes need to be cleared out in order for goods to be delivered to the buyers' origin country.
VAT in the UK and EU
Under certain circumstances, some eBay marketplaces will collect VAT. Refer to Your VAT obligations in the UK & EU for more information about this consumer spending tax and your responsibilities when shipping to the UK and EU.
Delivered duty paid vs. delivered duty unpaid
DDP Incoterms - Delivered Duty Paid: The seller is responsible for handling the risks and costs of the shipment, including the import duty and any other charges related to delivery.
DDU Incoterms - Delivery Duty Unpaid: The customer is responsible for settling all charges in order for customs to release the shipment for delivery.
Customs clearance process
1. When your shipment arrives in the destination country, customs will inspect the package and inspect the attached paperwork.
Note: All international shipments need to have a commercial invoice attached. Shipments with certain restrictions may require additional paperwork.
2. The inspector will check the commercial invoice and cross-check the value with your online store. It is important to put correct values and information to avoid rejection by customs and having your goods returned to you.
3. If the value is above the de minimis threshold (the amount at which duties and taxes will be charged), then duties and taxes apply.
4. Customs will check who is responsible for paying the duties and taxes based on your selection when creating the shipment (DDU or DDP). If the shipment arrives with duties paid, the shipment will be released for delivery. If the shipment arrives with duties unpaid, the recipient will need to handle the payment. Customs will hold the package and the receiver will be contacted to clear out all outstanding duties and taxes to have the goods delivered.