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Duties and Taxes

Duties and Taxes

Understand how clearance charges are calculated, and learn about their role in the international shipping process.

Understand how clearance charges are calculated, and learn about their role in the international shipping process.

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Understanding Duties and Taxes

It’s important to consider the effects of duties, taxes and other clearance charges when determining an international shipment's total cost (also known as the 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 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 shipping label, the Commercial Invoice, and other relevant documents.

The customs clearance services included as part of FedEx® international services are meant to facilitate the import of goods intended for consumption in that country. Therefore, they do not include some special procedures that might be needed to meet governmental requirements for duties and tax relief at the time of export or import.

How Duties and Taxes Impact Your Shipment

In some countries, duties and taxes must be paid before the shipments 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

 

Goods and Services Tax (GST) and Value-Added Tax (VAT)

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.

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.

To see EU-specific VAT rates, please visit the European Commission (EC) Taxation and Customs Union website.

Determine Duties and Taxes

Valuation

The most common valuation method is the transaction value method. This means that the value of the goods on the Commercial Invoice must equal the value that the purchaser has paid for the goods. For example, if a United States purchaser bought a computer from a Canadian merchant for $2,000, the vendor must indicate that value on the Commercial Invoice, even if the vendor’s own cost to purchase the computer was only $1,000.

Proper valuation of all items in a shipment will help prevent clearance delays, rejections or seizure by customs, or monetary penalties.

 

Declared Value for Customs and Duties and Taxes

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 values are one of the most common reasons for duty and tax disputes.

A shipment's declared value represents the selling price or fair market value of the contents of the shipment, even if not sold. This value is identified on the FedEx Express® International shipping label as the Total Value for Customs, and it must be consistent with the value shown on the Commercial Invoice.

Commodity Descriptions

One of the most common reasons for customs delays is an inaccurate or vague shipment description. A consistent and detailed description of the shipment contents on all documents can help reduce customs delays.

 

Temporary Imports

Many countries allow tax relief (either duties and tax exemption upon entry or a refund after exportation) for items that are temporarily imported or exported, as long as certain conditions are met and procedures are followed. For instance, items are often temporarily imported or exported for:

  • Tradeshows
  • Conventions
  • Training
  • Assembly
  • Processing
  • Re-export after resale
  • Repair or replacement of damaged goods

 

Gift Exemption

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 or prohibited commodity. Any gift valued greater than the stated value may be subject to import duties and taxes.

Here are a couple of examples:

  • The United States: No duties and taxes are assessed if the value of the goods is equal to or less than USD $100.
  • Canada: No duties and taxes are assessed if the value of the gift is less than CAD $60.

 

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 in the above examples or other values set by the country.
  • In some countries, the shipment must be sent person-to-person — with no company involvement or indication of involvement on the shipping documentation.

Pay Duties & Taxes

FedEx Advancement Fee

Duties, taxes and other charges might be due when importing a shipment. FedEx may advance these fees as assessed by customs on behalf of the payor. A fee will be based on the advanced amount.

Responsible Party

When completing the FedEx Express® or FedEx Ground® International shipping label, you can select the shipper, the recipient or a third party as the party responsible for payment of any duties and taxes. If no party is selected on the shipping label, the recipient will default as the responsible party.

Non-FedEx Account Holders

Prepayment of duties and taxes before release to the recipient may be required if the recipient does not have a valid FedEx account number or a FedEx account in good standing. Shipments will be held at the destination station until payment arrangements are made.

Please note: As per the contract of carriage with FedEx, the shipper is ultimately liable for any duties and taxes assessed on the shipment. If the recipient refuses the package, or the recipient or third-party FedEx account holder refuses to pay for duties and taxes, the original shipper will be billed for duties and taxes.


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