How to Handle Duties and Taxes on International Shipments
Supply chains haven't had it easy lately. New trade deals, stricter regulations, and ongoing global tensions mean international shipping has more moving parts than ever before. Getting shipments across borders smoothly? That's become something of an art form.
The thing is, duties and taxes aren't just paperwork you deal with later. They're real costs that can make or break your margins. Miss something important, and suddenly your delivery is stuck at customs while fees pile up.
Whether this is your first time shipping internationally or you're looking to streamline an existing process, this guide breaks down everything without the confusing jargon.
The Real Cost of Moving Products Globally
Here's what happens with almost every international shipment: customs officers review what's coming through, figure out what's owed, then decide whether to release your goods.
Two main charges typically apply:
Duties are import taxes calculated based on what you're shipping and its value. Think of them as the government's way of protecting local industries while generating revenue.
Taxes vary by destination - VAT in Europe, GST in Australia, sales tax in the US. These get tacked on regardless of where your product was made.
Both charges depend heavily on your product's HS Code. This classification system might seem like bureaucratic nonsense, but it's actually quite specific. The difference between "crushed" and "whole" garlic can mean different duty rates. Raw materials versus processed goods? Different codes entirely.
Getting classification wrong doesn't just cost money - it can flag your business for extra scrutiny on future shipments.
Two main charges typically apply:
Duties are import taxes calculated based on what you're shipping and its value. Think of them as the government's way of protecting local industries while generating revenue.
Taxes vary by destination - VAT in Europe, GST in Australia, sales tax in the US. These get tacked on regardless of where your product was made.
Both charges depend heavily on your product's HS Code. This classification system might seem like bureaucratic nonsense, but it's actually quite specific. The difference between "crushed" and "whole" garlic can mean different duty rates. Raw materials versus processed goods? Different codes entirely.
Getting classification wrong doesn't just cost money - it can flag your business for extra scrutiny on future shipments.
How Much Will This Actually Cost?
Most countries calculate duties using either CIF (Cost, Insurance, Freight) or FOB (Free on Board) pricing.
CIF includes everything needed to land your product: the item cost, shipping fees, and insurance. FOB only counts the product value before shipping costs.
More customs offices are switching to CIF in 2025. Why? It gives them a fuller picture of what goods actually cost to import. For businesses, this means what looks like an affordable shipment upfront can become expensive quickly once all charges are added.
CIF includes everything needed to land your product: the item cost, shipping fees, and insurance. FOB only counts the product value before shipping costs.
More customs offices are switching to CIF in 2025. Why? It gives them a fuller picture of what goods actually cost to import. For businesses, this means what looks like an affordable shipment upfront can become expensive quickly once all charges are added.
What This Looks Like Country by Country
Australia: GST Plus Variable Duties
Shipments over AUD $1,000 typically face 10% GST plus customs duty based on your HS Code. Alcohol and tobacco carry additional charges.
There's good news though. Australia's Tariff Concession System offers duty reductions when no local alternative exists for your product. The catch? You need proper documentation and advance planning. This works especially well when coordinating production timelines with shipping schedules.
There's good news though. Australia's Tariff Concession System offers duty reductions when no local alternative exists for your product. The catch? You need proper documentation and advance planning. This works especially well when coordinating production timelines with shipping schedules.
United Kingdom: Post-Brexit Reality
Duties kick in for imports over £135, with VAT usually set at 20%. This VAT gets calculated on everything - product value, shipping, and insurance combined.
Trade agreements can reduce some costs, but excise goods like tobacco and alcohol still face higher rates. If you're working with sourcing partners, make sure they factor VAT handling and duty prepayment into the order process from day one.
Trade agreements can reduce some costs, but excise goods like tobacco and alcohol still face higher rates. If you're working with sourcing partners, make sure they factor VAT handling and duty prepayment into the order process from day one.
European Union: Complex but Manageable
The EU uses Combined Nomenclature (CN) Codes - basically HS Codes adapted for European rules. VAT and customs duties apply to most non-EU imports, with rates varying by product type and destination country.
Some EU countries exempt shipments under €150 from duties, but VAT still applies. Managing this across multiple European markets can get complicated fast. A solid logistics plan helps you avoid juggling different rules and timelines at every border crossing.
Some EU countries exempt shipments under €150 from duties, but VAT still applies. Managing this across multiple European markets can get complicated fast. A solid logistics plan helps you avoid juggling different rules and timelines at every border crossing.
United States: The $800 Sweet Spot
Shipments under $800? You're clear of duties. Go over that threshold, and rates apply based on HS Code classification. Additional fees like the Merchandise Processing Fee or excise taxes on specific products can also apply.
Free trade agreements offer savings opportunities, but only when paperwork is perfect. One mistake in classification or documentation can eliminate those benefits completely. Building compliance into shipping logistics upfront saves headaches later.
Free trade agreements offer savings opportunities, but only when paperwork is perfect. One mistake in classification or documentation can eliminate those benefits completely. Building compliance into shipping logistics upfront saves headaches later.
When Things Go Wrong
Shipments stuck at customs don't just pause operations - they can derail entire timelines. Storage fees accumulate daily. Customer relationships suffer. Worst of all, a pattern of classification errors or underpayments can trigger increased scrutiny on future shipments.
Smart businesses have started viewing duties and taxes as integral parts of their supply chain strategy, not obstacles to work around.
Smart businesses have started viewing duties and taxes as integral parts of their supply chain strategy, not obstacles to work around.
Planning Ahead Pays Off
International shipping involves duties and taxes - that's just reality. But they don't have to create constant stress or surprise costs.
Success comes down to clarity: knowing exactly what you're importing, understanding what you'll owe, and seeing how it all fits into your broader supply chain strategy.
Think of it this way - every hour spent getting classification and documentation right upfront saves days dealing with customs delays later. Every dollar properly budgeted for duties and taxes is a dollar that won't catch you off guard when invoices arrive.
Success comes down to clarity: knowing exactly what you're importing, understanding what you'll owe, and seeing how it all fits into your broader supply chain strategy.
Think of it this way - every hour spent getting classification and documentation right upfront saves days dealing with customs delays later. Every dollar properly budgeted for duties and taxes is a dollar that won't catch you off guard when invoices arrive.
Ready to Ship Smarter?
The most successful international businesses treat customs compliance as a competitive advantage, not a necessary evil. When everything is properly classified, documented, and planned, shipments move faster and costs stay predictable.
At The Sourcing Co., we've helped hundreds of businesses navigate international shipping complexities. From product development and manufacturing to quality control and global logistics, we handle the details so you can focus on growing your business.
Ready to take the guesswork out of international shipping? Our team combines local market knowledge with global manufacturing expertise. Whether you're just starting to explore overseas sourcing or looking to streamline existing operations, we're here to help.
Contact our team today and discover how partnership with experienced sourcing professionals can transform your international operations from a source of stress into a competitive advantage.
At The Sourcing Co., we've helped hundreds of businesses navigate international shipping complexities. From product development and manufacturing to quality control and global logistics, we handle the details so you can focus on growing your business.
Ready to take the guesswork out of international shipping? Our team combines local market knowledge with global manufacturing expertise. Whether you're just starting to explore overseas sourcing or looking to streamline existing operations, we're here to help.
Contact our team today and discover how partnership with experienced sourcing professionals can transform your international operations from a source of stress into a competitive advantage.