Updated on July 18, 2023
These days, with e-commerce making it so easy to buy products from around the world, the number of items being shipped overseas is booming. Whenever you ship something abroad, you can expect customs costs to be part of that journey. Customs costs refer to the duties, fees, or taxes charged on items shipped internationally. These costs vary depending on the items and the countries of origin and destination. The purpose of customs is to control the flow of goods, especially restrictive and prohibited products, into and out of a country to protect the economy, residents, jobs, and environment of each country by controlling the flow of goods, especially restrictive and prohibited goods, into and out of the country. Customs costs pay for the procedures in the control process.
This blog explains why customs costs are often not included in shipping quotes, and how to estimate those costs so you can prepare for any additional charges. It also provides some tips for minimizing or avoiding customs fees altogether.
Customs costs are usually not included in a shipping quote because the cost of customs fees and tariffs is unknown at the time of quoting. And with so many potential steps where charges can be added, that figure can range considerably. Also, specific shipments can be required to go through customs exams in which customs agents search the shipment to ensure it isn’t carrying drugs, guns, or other illegal items. About 3% to 5% of shipments get selected for a customs exam, which not only has a fee but can often cost time if a shipment is held. Here is a list of some surprise expenses that customs might add to your final invoice:
Inland delivery charges
General rate increase (GRI)
China's value-added tax (VAT)
Cargo insurance costs
Courier and documentation fees
Overweight container fees
Container management fees
With some research, you can anticipate if any of the above fees will apply to your shipment and, if they do, estimate what those costs will be.
The list above can seem daunting, but there are ways to get a ballpark figure on what the customs cost for a shipment might be. The first thing you should know is what duty rate applies to the particular goods within your shipment. The duty fee for each product type depends on the Harmonized Tariff Schedule (HTS) code assigned to it. The U.S. Customs Authority uses HTS codes as part of a worldwide coding system. You can find the HTS code for goods you intend to ship on the U.S. International Trade Commission’s website.
The duty fee is usually expressed as a percentage of the value of the goods, although some items incur a flat rate per kilogram. To determine the duty fee’s cost, multiply the goods’ value by the HTS percentage code for those goods and then divide that total by 100. For instance, if the goods are worth $5,000 and the HTS code is 2.5%, then the duty fee should be $125. The tariff lookup tool on the Department of Commerce’s International Trade Administration’s website can also be a useful source for searching the customs info database.
Some international shipments are tax-exempt, or the value of the load may be under the country of import’s de minimis threshold, which means the product is essentially so small that it does not need to be taxed. It is certainly worth looking into to see if your product fits into those categories.
With all of the tariffs, charges, and fees in the customs costs world, there have got to be some areas where you can reduce costs, right? There are. But in most cases, finding them means being diligent and knowledgeable. Here is a list of ways to keep some of your customs costs down:
Know the correct tariff classification: This is where having expertise in classifying products according to their HTS code is of great value. Getting the correct HTS code will save time and help avoid fines and audits in the future.
Be aware of the product’s origin: The country where the product was made can affect its tariff status, even if it is not coming from that country of origin.
Documentation and codes are crucial: Have all of your documents for customs clearance prepared and examined with a keen eye. Any mistakes or missing forms can lead to fines added to your fees. Your shipment can even get stuck at the border if the required documents are missing. It’s also worth double-checking all the HTS and other codes to ensure they are correct.
Monitoring the valuation of goods: The value of some products can occasionally change, which means that monitoring those products for changes will keep you up on what the tariffs could be when they reach the final destination.
Selecting a reliable broker: Having a quality partner with experience in international shipping while also knowing the ins and outs of the system is an extremely beneficial tool to have in your corner.
Plan for time-related concerns: Because some border facilities have different operating hours, it’s cost-effective to ensure your shipment arrives when it is open. Arriving too early or too late can cost time and money.
Deferred duty payment: To encourage the importation of essential products, some countries are allow a longer time for import duty payment.
Check on refund opportunities: A refund of taxes and customs duties may apply to some shipments. For example, in the case of temporary imports, the importer can be refunded the amount paid to customs. Ensure you or your partner know all applicable refund opportunities.
Bargain over brokerage fees: With brokerage fees usually being based on a number of factors — number of entries, the type of product, etc. — there is the ability to bargain and ask for lower fees.
There are a lot of variables when it comes to customs costs, some of which are unexpected. But there are some facets and processes that you can have an impact on and that can help reduce your costs. One of the ways to succeed is to link up with a quality broker that can provide experience and expertise. Freightmango can offer the knowledge and savvy to help you take on customs costs and cross into a world with fewer headaches and greater savings. With a fully-digital platform, up-to-the-minute visibility, dedicated service, and transparent pricing, Freightmango can be just what you need. To get started with Freightmango, head over to our website today.