Duties and import taxes
If you ship internationally, then your customers might be charged additional duties and import taxes when they receive their shipments. You can charge duties and import taxes at checkout if you meet the requirements. Before you set up charging duties and import taxes at checkout, ensure that you review this information about duties and import taxes.
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Carriers
A carrier is a service that transports a product. For products that are shipped across borders, they act as a customs broker and are responsible for collecting duties and import taxes. Carriers collect these fees either from the seller or the buyer, depending on the incoterms that are used for the shipment.
Carriers might charge a brokerage and disbursement fee for their services.
Buying DDP labels with shipping labels
DDP (Delivered Duty Paid) labels are supported only for specific carriers when purchasing shipping labels through Shopify's carrier accounts. If you collect duties and import taxes at checkout, then you can purchase DDP labels for the following carriers:
- Canada Post (USA destinations only)
- DHL Express
- DHL Express Canada
- DHL eCommerce
If you use any other carrier with Shopify's carrier accounts, then you can't purchase a label for orders where duties have been collected. You need to purchase the label externally or refund the order.
Incoterms
The options for how to manage duties and import taxes are called international commerce terms, or incoterms. Incoterms determine how your customer is charged, and how your shipping carrier collects payment for duties and import taxes. The following are the two most frequently used incoterms:
- Delivered duty paid (DDP). This term indicates that the seller assumes responsibility for any import costs that might be payable when goods cross borders, such as duties, import taxes, or brokerage/disbursement fees. You can collect payment for these charges during the checkout process. When the DDP incoterm is available, using it provides customers with a total price for the product and helps to avoid shipping delays.
- Delivered at place (DAP). This term indicates that the seller is only responsible for shipping the product, and that the customer is responsible for paying any import costs to the shipping carrier, such as duties, import taxes, or brokerage/disbursement fees upon delivery. Some shipping carriers charge additional fees for collecting duties upon delivery if the duties haven't been paid in advance. Using the DAP incoterm might result in additional charges to the customer.
To help your customers avoid additional fees, you can charge any applicable duties and import taxes in your checkout. Your carrier invoices you later for duties and import taxes, which you can then pay with the fees that you collect from your customer.
Customs fees
Fees that might be charged when importing goods come from a variety of sources, including the following fees:
Customs fees that apply to a shipment depend on its destination, value, and the carrier that transports the goods.
Low-value goods tax and import tax
The tax portion of the customs fees is either a low-value goods tax or an import tax, depending on the de minimis, a value threshold which varies between different countries and regions.
Low-value goods tax
A low-value goods tax is applied to shipments in some countries and regions for shipments that are below the de minimis if you're registered to collect tax in that country or region. For example, The European Union has a low-value tax threshold where value added tax (VAT) is collected on cross-border orders that are equal to or less than €150 EUR, whereas the United Kingdom has a low-value tax threshold where VAT is collected on cross-border orders that are equal to or less than £135 GBP. Low-value goods taxes apply in the following countries:
- Australia
- New Zealand
- Switzerland
- Norway
- the European Union
- the United Kingdom
In most cases, the DDP incoterm is recommended for shipments to areas with a low-value goods tax so that orders that go above the threshold also have the duties and import taxes calculated at checkout. For example, when you use the DDP incoterm for the European Union, the following occurs:
- VAT is applied to orders that are equal to or less than €150 EUR.
- Import VAT and duties are applied to orders that are greater than €150 EUR.
When you use the DDP incoterm for the United Kingdom, the following occurs:
- VAT is applied to orders that are equal to or less than £135 GBP if you have entered a tax registration for the UK in your tax settings.
- Import VAT and duties are applied to orders that are greater than £135 GBP.
Low-value goods taxes are generally remitted to tax authorities by using a tax return. It's up to you to decide whether you should collect and remit taxes. If you're not sure if you should register to collect low-value goods taxes, or how to remit low-value goods taxes, then contact the country or region's tax authority or a local tax expert.
If you process a refund for an order that has low-value taxes applied, then contact the country or region's tax authority to recover the tax that you've remitted. You can only remit or recover taxes in countries where you're already registered to pay taxes.
Import tax
Import taxes are charged by a country or region's customs authority for shipments that are above the de minimis. In most cases, this tax is equivalent to the local sales tax, such as VAT or goods and services tax (GST). If you process a refund for an order that has import taxes applied and that has been fulfilled, then contact the country or region's customs authority to recover the tax that you've remitted.
Customs duty
Customs duty is a charge applied to shipments by the receiving country or region's customs authority for shipments that are above the de minimis. Customs duty is calculated based on the following factors:
- the product’s declared value and shipping costs
- the product category as determined by the HS code
- the country or region of origin
- the destination country's tariff rates
- applicable trade treaties
Duties and import tax based on the product's declared value might be affected by discounts or free items.
Tariffs
Tariffs are customs duty that's applied to goods that originate from a specific country or region. To ensure that duties for your products are accurate, ensure that you've added HS codes and country of origin to your products. Learn more about tariffs.
Brokerage and disbursement fees
Carriers might charge a brokerage and disbursement fee for their services. This charge isn't included when charging duties and import taxes at checkout is activated. If you need to charge your customers a brokerage and disbursement fee, then consider adding the cost of the fee to your shipping rates.
International shipping agreements
International shipping agreements are used in the transportation of goods between a customer and a merchant. These agreements determine who takes responsibility for the goods during the time that they're in transit. The following are the two most common agreements:
- Cost, insurance, freight (CIF). This agreement indicates that the seller assumes insurance and other costs until the goods are received by the seller.
- Free on board (FOB). This agreement indicates that insurance and other costs are assumed by the customer as soon as the goods have been shipped.
Most countries and regions include shipping, handling, and insurance (CIF) when they determine whether a shipment is above duties and import tax thresholds. Others exclude these costs (FOB). If you're not sure which agreements are available to you, then contact your shipping carrier. The following are the most notable countries and regions that don't include the costs for shipping, handling, and insurance:
- Canada
- The United States
- Australia
- New Zealand
- South Africa
Ensure that you inform your customers of the shipping terms.
De minimis
Not all orders are subject to duties and import taxes. Many countries and regions have a de minimis, which is a maximum order value below which duties and import taxes don't apply.
Generally, only pre-tax values are counted toward the de minimis threshold. If your products use tax-inclusive pricing, then the tax portion of the product price typically isn't counted towards the de minimis threshold. Order and product discounts are also generaly not counted toward the de minimis threshold.
The following table provides some examples of de minimis values.
| Country | Duty de minimis value | Tax de minimis value |
|---|---|---|
| Canada | $20 CAD | $20 CAD |
| Mexico | $50 USD | $117 USD |
| Australia | 1000 AUD | 0 AUD |
| China | 50 CNY | 50 CNY |
| Hong Kong | 0 HKD | 0 HKD |
| Ireland | €150 EUR | €22 EUR |
| Japan | 10,000 JPY | 10,000 JPY |
| Sweden | 1,600 SEK | 300 SEK |
| Switzerland | 5 CHF | 5 CHF |
The de minimis is different for each country or region, and some have specific rules that affect the de minimis value depending on where the shipment originates. For example, goods that are shipped into Canada from Mexico or the United States are subject to duties if the goods are valued at $150 CAD or more, and subject to import taxes if the goods are valued at $40 CAD or more.
If you're not sure what the de minimis value is for the country or region that you ship to, then check the website of that country or region's tax authority, or consult a local tax expert.
Changes to de minimis in the United States
The change to US de minimis affects all imports from all countries. Duty rates vary based on product classification as determined by HS codes and country of origin, typically ranging from 0% to over 25%. Products from countries with trade agreements, such as USMCA for Canada and Mexico, might qualify for preferential rates with proper documentation.
For the most current and accurate information about regulatory changes, you should review official government sources, monitor updates from relevant regulatory agencies, and consult with customs brokers or trade attorneys.
If you're an international merchant that sells to the United States, or a US merchant that uses a dropshipping model, then you should take the following actions:
- Add Harmonized System (HS) codes and country of origin to all your products. You can add these codes individually, in bulk, or by using a CSV file upload.
- Review your product pricing to evaluate offsetting incremental costs.
- Consider collecting duties and import taxes at checkout.
- Determine your shipping fulfillment strategies, such as using Delivered Duties Paid (DDP) labels.
- Update your shipping and returns policies to reflect fulfillment choices.
- Adjust and review your checkout settings to test the checkout experience for US customers.
Preferential treaties
Preferential treaties, also known as free trade agreements (FTA), are agreements between two or more countries or regions that can lower or eliminate duties on certain products. Some examples of preferential treaties are:
By default, preferential treaties are included in the calculation of duties and import taxes, but you can deactivate this setting in your admin. Whether a preferential treaty applies to a sale is determined by the shipment's shipping origin and destination, and by the product's country code origin and HS code. If you make a cross-border sale that a preferential treaty applies to, then you might be asked for documentation by the country or region's customs authority to validate the product's country of origin, typically in the form of a certificate of origin.
If you're not sure whether your shipments are eligible for any preferential treaties, then consult with your carrier or a local tax expert to determine eligibility, and whether additional documentation is required.
Deactivate preferential treaties
If you don't want to use preferential treaties, or if you're not able to provide the required documentation for a preferential treaty that you're eligible for, then deactivate preferential treaties in your duties and import taxes settings.
Steps:
From your Shopify admin, go to Settings > Taxes and duties.
In the Duties and import taxes section, click Manage.
In the Related settings section, toggle Reduce rates when preferential treaties allow.
Click Save.
Postal duty rates
By default, duties and import taxes are calculated the same way for both commercial and postal carriers. For packages shipped to the United States, this means that duties and import taxes are calculated by using the HS codes and country of origin information that you've added to your products.
If you use a postal carrier, such as Canada Post, then you can activate postal duty rates in your Shopify admin. When activated, this setting calculates duties for packages shipped to the United States ad valorum (based on the value of the shipment's contents) and country of origin (COO). This option can result in lowered duties and import tax.
Using postal duty rate calculations requires that you define a COO for each of your products. You can also set a default COO for your products, which is used if a COO hasn't been manually applied to a product.
Activate postal duty rates
From your Shopify admin, go to Settings > Taxes and duties.
In the Duties and import taxes section, click Manage.
In the Related settings section, toggle Use postal duty rates into the United States.
Click Save.
Determine duties for Section 232 tariffs
Shipments into the United States that contain steel or aluminum are subject to Section 232 tariffs. If you sell to customers located in the United States and your products contain steel or aluminum, then you can specify how much of your products are made of these metals. This can help you to calculate duties and import taxes based on the actual amount of steel or aluminum in your products, rather than being based on the total value of the product.
Review the following considerations before activating this feature:
- The percentage that you select applies to the calculation of duties and import taxes only for shipments to locations in the United States. It doesn't apply to any other destination.
- The percentage that you select applies to all products in your store that are subject to Section 232. You can't set different percentages for individual products.
- The default percentage for the Section 232 setting is 100%. If you don't change this percentage, then tariffs are calculated assuming that your products that are subject to Section 232 are made of 100% steel or aluminum.
Steps:
From your Shopify admin, go to Settings > Taxes and duties.
In the Duties and import taxes section, click Manage.
In the Related settings section, enter the percentage of your product that's made of steel or aluminum.
Click Save.