Better Global Buying Experiences with Duties & Import Taxes at Checkout

by Rebecca Engelberg

A graphic that represents duty and import tax values being calculated at checkout

The arrival of an international purchase should bring delight, not unexpected fees. Now you can prevent costly surprises—for customers and yourself—with one of our newest features.

We recently rolled out Shopify Markets, our new global commerce solution that is already changing how our merchants think about selling worldwide. Loaded with powerful features and capabilities, Shopify Markets helps you easily sell to anyone on the internet, all from a single store. A key feature of Shopify Markets available to Shopify Advanced and Plus merchants is a native Duties & Import Taxes calculator, which lets merchants calculate and collect duties directly at checkout.

Offering duties prepaid is great for merchants because it means fewer parcel refusals, fewer chargebacks, and a higher customer lifetime value. For your customers, it provides total cost clarity on purchases, no surprise fees on delivery, and a better overall experience. In short, everybody wins.

Here’s Cole Atkinson, Product Manager for Shopify Markets, to discuss the importance of collecting duties and import taxes at checkout:


While we’ve simplified the process of calculating and collecting duties and import taxes at checkout, there are still some pieces you should familiarize yourself with to ensure accurate calculations and a smooth overall experience, as detailed below.

In this post, you’ll learn to:

Eliminate surprises for customers by using DDP shipping terms

What does it mean to ship DDP?

With respect to international shipping, DDP (delivered duty paid) means that the merchant/sender is responsible for covering duties, import clearance, and any applicable taxes. The merchant collects applicable duties and import taxes in advance by charging the customer at checkout so there are no additional fees after the fact.

By contrast, DDU or DAP (delivered duty unpaid or delivered at place, respectively) means that it is the responsibility of the receiver/customer to settle any duties or import taxes associated with their international delivery. Typically, the customer is contacted by customs once their shipment arrives and will be required to settle any charges in order for customs to release the shipment to them.

The downside of DDU/DAP

To begin, parcels shipped DDU/DAP may not be delivered to a customer’s door, but rather to a post office or pick-up point. This is far from ideal, and lowers a customer’s lifetime value. If the customer wasn’t expecting additional charges or having to travel to a pickup location, the chance of rejected parcels also increases—which is very costly to merchants.

Often, buyers are not aware that duties or import taxes will apply to their package, let alone how much they will cost—which can result in a negative customer experience and a risk that the parcel will be refused. In these cases, the cost to the merchant is significant: they not only have to refund the buyer for their order, but also cover expenses for the return shipment. This process is costly and requires special customs documentation so that duties and import taxes aren't applied for return items.

Here’s our Product Manager Cole again to break down how shipping DDP provides a better overall customer experience:

Getting started with DDP

  1. Talk to your 3PL rep, carrier, or shipping app about their DDP shipping options
    Most express carriers offer DDP shipping with associated fees. Unfortunately, most postal carriers do not currently offer DDP shipping methods, or only offer them to limited countries. Looking for a shipping or fulfillment app? Check our Works with Shopify Markets app list for options.
  2. Make sure your orders have the right information
    Orders where duties and import taxes have been collected are tagged as DDP in the Shopify admin and APIs. Make sure your 3PL or shipping app is sharing that parameter with your shipping carrier, along with the product information used to calculate duties and import taxes (like HS code, country of origin, and product price).
  3. Update your shipping rates
    Shipping carriers might charge you a disbursement fee to process your DDP parcels. This fee can be negotiable, so we recommend discussing with carriers or 3PL sales rep. If you want to collect that fee from your buyers, you can simply add it to your shipping rates for markets where you offer DDP.
  4. Reconcile duties collected from customers with duties paid to customs
    Once you start shipping DDP, your shipping carriers will include duties, import taxes, and brokerage fees in their invoices to you. You should reconcile duties collected versus duties paid on the first few invoices you receive from your carriers, looking for any incorrect HS codes in your catalog and identifying any issues in the shipping label/commercial invoice printing process.

Set up Duties and Import Taxes

Updating your store shipping policy

Once you’ve updated your shipping terms to enable charging duty and import taxes at checkout, it’s important to communicate this change to your customers by updating your shipping policy and notifications. A well-considered shipping policy not only helps you proactively set the right expectations around shipping times and costs, it also becomes an asset whenever customers have questions about their orders.

Whether you’re creating a new shipping policy from scratch or updating your existing policy to curb customer support inquiries, we’ve put together this resource to help you cover and communicate the right details. (Pro tip: use the template to get started and find examples to borrow ideas from.)

Increase calculation accuracy with HS codes

Harmonized System codes (HS codes) are an internationally recognized system for classifying traded products. They’re used by customs authorities worldwide to define the duties rate for a specific product being imported to a given country and apply any applicable restrictions.

HS codes are important because they simplify automating duties and import tax estimates and help shipments clear customs faster. It’s recommended that you have Harmonized System codes as well as the country of origin on all of your products to optimize duties and import taxes calculation accuracy.

Here’s our Product Manager Cole to help you understand HS codes and how to set them up:

HS codes vs. HTS codes

HS codes are used to define the duties rate for a specific product being imported to a given country, and HTS codes (Harmonized Tariff Schedule codes) are product classification codes consisting of eight to 13 digits. Regardless of the number of digits in a code, the first six will always be the same—whereas codes beyond six digits simply provide additional information for that specific country.

Getting started with HS codes

HS codes might sound confusing, but luckily you don’t need to be an expert to get started:

  1. You can easily configure HS codes for your products by uploading your HS codes via CSV directly through your duties and import taxes management page. Alternatively, you can add the information on the product’s page from the Shopify admin, or by using the bulk editor.
  2. If you’re not sure which codes you need, you can look up the correct HS codes associated with your products yourself in the World Trade Organization’s database. The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.
  3. If you’re still missing HS codes for your products, Shopify’s duties calculator will make a best guess based on product descriptions and product type. Making a best guess is better than doing nothing at all in absence of HS codes. Just make sure to compare invoices (i.e., reconciliation) so you can minimize discrepancies.

Reconciliation

Check for discrepancies between duties collected and duties billed by customs to identify any potential issues with HS codes or downstream workflows like commercial invoice generation. HS codes can easily be changed, so don’t sweat it if they need some tweaking.

Set up Duties and Import Taxes

Inform your global strategy by brushing up on regional tax thresholds

So you’re all set to collect duties and import taxes from your international customers. But wait—did you know that they won’t always have to pay them, thanks to a minimum threshold value called de minimis for both import taxes and duties?

What is a de minimis value?

De minimis refers to the minimum value of a shipment before it can be charged import taxes and duties, and is set by the destination country or region of a shipment. Shoppers may avoid paying duties and import taxes when shipping to a particular country if the value of their shipment does not exceed the de minimis value. It’s worth noting that there are growing exceptions in countries that have a tax de minimis. These countries may instead impose a low value goods tax to shipments below a certain value. But not to worry: Shopify’s Duties and Import Taxes calculator knows when to collect this type of tax, too.

Here’s Cole, Product Manager for Shopify Markets, to explain minimum tax thresholds in different markets:


Every country has its own method of calculating duties and import taxes. Take the United States, for example, which has one of the highest duties and import de minimis thresholds in the world. When US citizens purchase items from abroad, they only pay duties and import taxes on orders over $800 USD, whereas Canadians typically pay duties and import taxes on imported goods with a de minimis of only $20 Canadian dollars (about $15 USD). This is just one example of how drastically tax thresholds can differ between countries.

Understanding the duties and import tax thresholds of foreign markets can help inform your global sales strategy. For instance, is the price of your average cart size competitive in a new market when duties and import taxes are applied?

Simplifying duties and tax collection

With so many countries and varying tax thresholds, how can you stay on top of the duties and import taxes your customers need to pay on their orders?

Thankfully, Shopify’s Duties & Import Taxes calculator automates complex duties and import tax calculations, meaning you don’t have to spend hours researching tax thresholds by country. Even better, Shopify Markets only collects these duties and import fees when required, making it easier to stay compliant with country-specific tax laws.

Final thoughts

Navigating the complex world of international customs compliance in order to provide a great experience to your global customers is now simpler than ever, thanks to Shopify Markets’ Duties & Import Taxes. With this feature you can:

  • Provide your international customers with total cost clarity
    With duties and import tax estimates, your international customers have total cost clarity at checkout, building trust and confidence in your brand and enhancing experiences with your business.
  • Reduce the risk of rejected items and chargebacks
    By estimating duties and import taxes in advance, you can collect fees upfront and prevent unwanted surprises for your international customers at delivery.
  • Automate estimates across regions and products to help manage regional tax rules
    Don’t waste time manually tracking rates by products and countries as they change over time. Shopify’s Duties & Import Taxes calculator does the heavy lifting for you.

Want to jump in? Start using Duties & Import Taxes at checkout with Shopify Markets.

Set up Duties and Import Taxes

 

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