Customs duties and taxes when shipping internationally

In this article you will find information on custom duties and taxes. You will learn why they are applied and what does the custom clearance process look like.

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Reasons behind custom 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.

The main reasons governments want to apply those fees on imported goods is because they want to:

  1. Protect domestic businesses from foreign competitors
  2. Have control of the flow on certain products
  3. Taxes raise revenue

Those Duties and Taxes need to be cleared out in order to have the goods delivered to the country of buyers' origin.

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 import duty and any other charges related to delivery.

DDU Incoterms - Delivery Duty Unpaid. The receiver/customer is responsible for settling all charges in order for customs to release the shipment and have it delivered.

Customs clearance process

What does the process of customs clearance look like when shipment arrives in the country of destination and how do the duties and taxes affect the whole process of clearance?

Below you can find a brief overview of the process:

When your shipment arrives in the destination country, the customs will inspect your package and look at the paperwork attached. Please note that all international shipments need to have a commercial invoice included. Additionally, shipments with certain restrictions may need additional paperwork.

The customs inspector will check the invoice as well as he can also check your website/store to check if everything is correct - it is important to put correct values and information to avoid rejection by the customs and having your goods returned back.

If the value is above the de minimis threshold (the amount at which duties and taxes will be charged) then duties and taxes apply.

Going forward, they will check who is responsible for paying duties and taxes for your shipment based on your selection when creating shipment ( DDU or DDP).

If the shipment arrives with duties paid, it means the sender has handled payment, allowing it to be released for delivery. If the shipment arrives with duties unpaid, the recipient will need to handle it. Customs will hold the package, and the receiver will be contacted to clear out all outstanding duties and taxes to have the goods delivered.

Once everything is cleared with the customs, they will have the parcel released and delivered to the customer.

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