Import Duties & Taxes Explained
When shipping internationally, many businesses are surprised when recipients are asked to pay duties and taxes before their package is delivered. These charges are more than just formalities — they’re part of global trade laws and can directly impact customer experience and profit margins.
Why Do Countries Charge Duties?
- To protect domestic industries from foreign competition
- To regulate the flow of specific goods
- To raise government revenue
Duties and taxes aren’t optional. As an importer, it’s your responsibility to understand and manage them. This guide explains the essentials — from terminology to valuation — so you can avoid delays, penalties, or angry customers.
Key Terms You Should Know
- Import Duty: A tax applied to goods shipped internationally. It varies by product category.
- GST (Goods & Services Tax): A flat-rate tax, reimbursed through the supply chain except to the end buyer.
- VAT (Value-Added Tax): Charged to the end consumer for goods and services.
- Commercial Invoice: Required shipping document that includes product details, quantities, and value.
- De Minimis Value: The threshold where a shipment becomes taxable.
Need help finding your tax rate? Use our HS Code Lookup Tool.
Incoterms: Who Pays What?
Incoterms (“International Commercial Terms”) define who — the sender or receiver — is responsible for paying duties and taxes. Set by the International Chamber of Commerce, they standardize shipping contracts worldwide.
For eCommerce and B2C shippers, the two most important Incoterms are:
- DDP (Delivered Duty Paid): The seller covers all duties and taxes upfront.
- DDU (Delivered Duty Unpaid): The buyer is responsible for paying any customs charges upon delivery.
Learn more about common freight terms here.
How Are Duties & Taxes Calculated?
To calculate, multiply the **taxable value** of the shipment by the **country’s tax/duty percentage**.
The taxable value is determined by one of two methods:
- FOB (Free On Board): Tax is based only on product value. Often used for sea freight.
- CIF (Cost, Insurance, Freight): Tax includes product cost, shipping, and insurance. Common for air freight.
How to Plan for Duties & Taxes
Before shipping internationally, ask yourself:
- Do I know the tax threshold of the destination country?
- Should I work with a customs broker?
- Will I pre-pay duties, or pass them to the buyer?
- Am I transparent about fees in my policies, product pages, and checkout?
Not being upfront about duties can lead to:
- Frustrated customers caught off-guard by surprise fees
- Order cancellations
- Customer service overload
Customs: What to Expect
- Shipment arrives at destination customs.
- Officials inspect the commercial invoice and verify item value.
- If the value is over the de minimis threshold, duties are applied.
- They determine who pays — sender (DDP) or receiver (DDU).
- If unpaid, the parcel is held. The courier’s broker contacts the customer.
- Once paid, shipment is released for delivery.
Common FAQs
Q: My competitors don’t charge tax — should I skip it too?
A: No. Not charging tax is illegal and considered tax evasion. Be transparent instead.
Q: Can I mark the item as a gift?
A: No. Customs verifies value and origin, not the reason for shipping.
Q: What if I under-declare the value?
A: Customs can check your online pricing. Undervaluing is a legal risk.
Q: Should I pre-pay duties or let the buyer handle them?
A: Pre-paying reduces delivery friction and improves customer experience.
Q: What’s a courier handling fee?
A: When you ship DDP, the courier may charge a small fee (3–4x cheaper than DDU brokers).
Q: Why are thresholds and tax rules different?
A: Each country sets their own customs policy. Always research your destination country.
Glossary Highlights
- CIF: Cost, Insurance, and Freight (sea freight).
- FOB: Free On Board (value-only tax base).
- Commercial Invoice: Essential shipping doc listing product, value, and origin.
- Customs Broker: Helps manage rules and paperwork at both origin and destination.
Need Help with Duties & Shipping?
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Questions? Call 877-887-4472 or visit our site.
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