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5-Minute Guide to Duties and Taxes

Posted on Apr 25, 2023 9:45:00 AM by Brandon Draga

International and cross-border shipping are important benchmarks in a business’ growth.

But when a small business owner decides to expand beyond domestic shipping, it can be overwhelming at first.

SMBs often face complex customs requirements, including duties and taxes.

To guarantee shipments clear customs without incident and to prevent unforeseen charges, it's crucial to understand these obligations.

In this post, we'll cover the basics of duties and taxes and provide some tips on how to navigate the customs process and help set your business up for international success.


What are Duties and Taxes?

Duties are fees imposed by the government on goods imported into a country.

These fees are designed to protect domestic industries and generate revenue for the government.

The rate of duty varies depending on the country of origin of the goods and the type of goods being imported.

Taxes are another form of fee imposed by the government on imported goods.

Taxes can include sales tax, value-added tax (VAT), or goods and services tax (GST).

As with duties, the rate of tax varies depending on the country of import and the type of goods being imported.


Source: Wikipedia


Why do SMBs Need to Know About Duties and Taxes?

As an SMB shipping internationally, it's essential to understand your obligations when it comes to duties and taxes.

Failure to comply with these requirements can result in delays, fines, or even seizure of your goods.

Additionally, duties and taxes can add significant costs to your shipments, so it's crucial to factor them into your pricing and shipping fees.


How are Duties and Taxes Calculated?

The amount of duty and tax you are required to pay on a given shipment will depend on several factors:

  • the country you're shipping to
  • the type of goods you're shipping
  • the declared value of your goods

The declared value is the total value of your goods, including shipping and insurance costs.

To determine the applicable duties and taxes for your shipment, you'll need to determine the Harmonized System (HS) code for your goods.

The HS code is a standardized system used to classify traded products.

Once you know your HS code, you can use the Canada Border Services Agency's (CBSA) tariff database to estimate the applicable duties and taxes.

In some cases, you may be eligible for a duty exemption or reduction. For example, if you're shipping goods to a country that has a free trade agreement with Canada, such as the US or Mexico, you may be eligible for a reduced or waived duty rate.


USMCA-alternate-names-FreightcomSource: Wikipedia


Tips for SMBs Shipping Internationally

Navigating the customs process can be overwhelming, especially if it’s your first time shipping cross-border or internationally.

These tips will help you avoid common pitfalls and ensure your shipments clear customs smoothly:


Work with a Customs Broker

A customs broker can help you navigate the complex customs process and ensure that your shipments comply with all applicable regulations.

They can also help you calculate the applicable duties and taxes and handle the necessary documentation.

While a customs broker will add to your shipping costs, their expertise can save you time, money, and stress in the long run.


Accurately Declare the Value of Your Goods

To avoid delays and penalties, make sure to accurately declare the value of your goods.

As we mentioned earlier, this value should include the cost of the goods, shipping fees, and insurance.

As a rule of thumb, it’s always preferable to round up the declared value of your goods, as under-declaring the value of your goods can result in fines and the seizure of your goods. .


Understand the Regulations of the Country You're Shipping To

Shipping regulations and requirements can vary widely depending on the country you're shipping to.

Make sure to research the regulations of the country you're shipping to and ensure that your goods comply with all applicable requirements.

This may include obtaining permits or certifications, labelling your goods correctly, or using specific packaging.


Use Reliable Shipping Carriers

No matter the destination is for your goods, carriers are the backbone of their journey.

Using a reliable shipping carrier can help ensure that your shipments reach their destination on time and in good condition.

Be diligent in ensuring that you are booking your shipments with carriers who have a strong track record with cross-border and international services.




Expand Your Shipping for Less with Freightcom

Growing your business is almost always a gamble, especially trying to do so without tools that can help make your expansion easier.

Whether you need to start shipping cross-Canada, cross-border, or across the world, Freightcom has solutions that make doing so better for your business.

Freightcom is the all-in-one shipping management platform that provides businesses with discounted, real-time rates on LTL and parcel shipping, including cross-border LTL and international parcel services.

We help you quote, book, ship, and track all your shipments in one place, saving your business time and money, all for zero upfront or monthly fees!

Contact one of our shipping experts today and grow your business faster with the smartest shipping in the industry.

Book a Demo

Topics: Shipping Tips, LTL, Cross-border, Parcel

Brandon Draga

Written by Brandon Draga

Brandon Draga is a full-time content writer at Freightcom, the leading shipping solution for businesses in Canada. When Brandon is not writing content to help businesses with their shipping needs, he can be found at local skate parks or writing fantasy novels.

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