Duties & Taxes

When shipping goods internationally, it is important to consider the effects of duties, taxes, and other clearance charges (in addition to the transportation cost) when determining a shipment's total cost (landed cost). Depending on the shipment content and the destination country, clearance charges could significantly impact the total shipment cost. Being able to calculate and communicate the landed cost up-front can save both the shipper and the recipient valuable time, money, and effort.

Duties and taxes are imposed to generate revenue and protect local industry; almost all shipments crossing international borders are subject to duty and tax assessment by the importing country's government. Customs officials assess duties and taxes based on information provided on the air waybill, the Customs Invoice, and other relevant documents. In some countries, duties and taxes must be paid before the goods are released from customs. A shipment's duty and tax amount is based on the following:

• Product value

• Trade agreements

• Country of manufacture

• Description and end use of the product

• The product's Harmonized System (HS) code

• Country-specific regulations

Many countries have a general consumption tax which is assessed on the value added to goods and services. In some countries such as Canada, Singapore, Australia, and New Zealand, this tax is known as the goods and services tax or GST.

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The Canadian sales taxes are the Provincial Sales Tax (PST), the Quebec Sales Tax (QST), the Goods and Services Tax (GST), and the Harmonized Sales Tax (HST) which is a combination of the PST and the GST in some provinces.

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For European Union (EU) countries, this tax is known as a Value-Added tax (VAT). Businesses that are VAT-registered and fully taxable do not bear the final costs of VAT because it is a tax on consumer expenditure.

The most common valuation method is the ‘transaction value method’. This basically means that the value of the goods on the Commercial Invoice must equal the value that the purchaser has paid for the goods.

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Proper valuation of all items in a shipment will help prevent clearance delays, rejections or seizure by customs, or monetary penalties under the CBSA’s Administrative Monetary Penalty System (AMPS) program.

Customs officials use a shipment's declared value (the value the shipper declares on the goods being shipped), along with the description of the goods, to determine duties and taxes. It is important to ensure that the declared value claimed is accurate. Inaccurate declared value is one of the most prevalent reasons for duty and tax disputes.

Many countries allow gifts to enter duty-free if the value of the gift is less than a certain amount and if the gift being shipped is not considered to be a regulated/prohibited commodity. Any gift valued greater than the stated value may be subject to import duties and taxes. 

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To qualify as a gift, the shipment must meet the following requirements:

• The shipping documentation must be clearly marked "GIFT" and include a detailed description of the commodity.
   

• The total value of the shipment must not exceed the values listed for gift exemption.
   

• In some countries, the shipment must be sent person to person — with no company involvement or indication of involvement on the shipping documentation.