To start, I’m not trying to avoid customs or facilitate any variety of tax or duty evasion.
I run an online store that (among other things) sells fashion accessories.
One customer has ordered over $500 in products from us. Last week, she sent us an email upset that she had received a note from her postal service indicating that tax and duties were owed on her purchase, and that apparently she needed to pay those before receiving her merchandise.
I kind of thought that’s how things worked, but she indicated that when she had purchased from our competitors before, they had used carriers besides the postal service and that she had never received any notices asking her to pay tax or duties on those products.
What gives?
Does using UPS or FedEx actually cause your customs to go down somehow?
Some of our competitors she’s buying from are good-sized businesses with substantial revenue, and I’m pretty sure they don’t make a habit of filling out fraudulent customs paperwork.
Maybe she’s LIABLE for the taxes and duties with UPS and FedEx deliveries from my competition, but is being trusted to pay those taxes with her annual tax returns with private carriers rather than being asked to pay them upon delivery with Canada Post?
She’s mad at me that she’s being assessed taxes here, and I feel her, but I have the feeling she’s either lying to me, dodging taxes, or accidentally dodging taxes…
Use a customs broker - you will end up paying duty. Most US sites either offer an estimate on the duty or when you agree to the cost there is a line saying “not including duty and taxes”.
There are services near most large Canadian cities near the border - ship to a drop point just across the border, let the customer come and get it. that’s what I do now; my wife’s specialized shoes, for example, cost half what they do retail in Canada for the same make and style.
Shipping to Canada s hit and miss. Some companies handle customs processes on their own, some go through a broker, some (like the postal system) seem to have a branch office of the customs people on site.
I gave up direct shipping to Canada because it is roulette whether I pay zero extra or if the price of a $40 item doubles thanks to broker fees and poor choice of customs category. (Should I pay any tax at all on used books? I thought not.)
So you can try a different shipper, and see what the results are. I don’t have a good suggestion yet.
You can take back, IIRC, $50 tax free any day, $800 after 48 hours in the USA. Quite often, unless you are bringing back a large amount of non-grocery goods or some interesting stuff, the customs people may wave you through after a few questions.)
The whole, misstated values issue aside, the brokerage fee to get a parcel across the border is $35US, or more, if you ship via FedEx or UPS. The Post Office fee is $5US (may have risen since!).
Filling out the form (with correct value), (and no responsibility for US taxes resulting!), seems a small thing to ask to save so much, especially on a smaller purchase.
When I buy on line it’s only from people who ship via the Post Office. Hope this helps!
If it’s actually the taxes and duty inconsistency that’s giving her fits, she needs to get over it! My husband’s business used to require regular materials shipped from the US. Over the course of several years there was zero consistency in whether there would be duty.
Same carrier, same materials, two weeks later, this time you owe duty! Show them the receipt for their last delivery with no duty, doesn’t matter, they won’t release it until you pay. You can go down and get a ruling from the officials at the government office stating no duty applies! Won’t make any difference. I used to rail about the complete lack of consistency, then I just got used to it.
In fact, there was absolutely no way to know if you’d owe duty on these goods this time or not. We could likely have undertaken getting the charges refunded, ( if we had the patience of saints perhaps! ) It just never seemed worth it for like $12. (Though it must have added up, over the years!)
This is the result of trade deals and complicated classifications systems that even the officials can’t agree on how to apply, I think!
I feel her righteous anger, but it’s not the shipper’s fault in any way whatsoever!
I almost feel like this is a weird scam to bully me into comping her for several hundred dollars in customs… and given that her customs are more than my profit, I’ve elected to just have the items returned to me.
It doesn’t look like I’m finding any support for her version of events. Several $500+ orders from 3 different vendors for fashion items… I cannot imagine NONE of those dinged her for shipping before.
I’ve ordered items from the U.S. on several occasions (10+ years ago) and I can only remember getting dinged by a “you owe us $X for duty and processing” notice once. So maybe it’s more a matter of luck than using particular shipping services?
Packages mailed as “Valued under $20” or “Gift under $60” are exempt from duty.
Rules for importing packages through Canada Customs are explained on the Canada Post website under section 2.
From the Canada Border Services Agency website:
If you were mailing to Ontario, for example, there is a $9.95 CAD fee plus 13% HST of the declared value of the package.
So … for a $500 USD package or $643.28 CAD. There would be $83.63 CAD (duty) + $9.95 CAD (handling fee) = $93.58 CAD
Does this seem accurate?
This is a really good question and something I struggle with also, as I run an online shop. I was unable to get definitive shipping rates for Domestic US, let alone rates to other countries, so I set up my rates based on rough estimates. The major shippers have something like 50-page rate tables just for the continental USA, and they take into consideration not just weight and distance but also package size now.
A few years ago I ran an online auction fundraiser for my dog rescue organization, and I remember a couple of the winners were in Canada. We lost money on those because the shipping to Canada turned out to be around $35.00 (which we had to eat because we didn’t know how much shipping to include in the winning bid), even identifying the package as a gift on the customs form. Based on that, I’ve estimated the Canadian shipping in my store as $35 flat rate. I think I’m going to lose money on that still, while the high shipping rate scares off most Canadian customers. (Some have told me so straight up. Canadians love shops that offer free shipping for this reason, but I don’t have the volume/margin to cover free shipping.)
I feel that any online shop needs to be able to offer shipping to any country in the world. After all, if people from Lithuania can browse your store, they should be able to make a purchase also. But the logistics are mind-blowingly difficult and I haven’t figured out any solution that will work.
I’m a Canadian who’s ordered many packages from the United States and overseas and here are the possibilities I’ve seen:
Shipped USPS, delivered via Canada Post: Rarely charged duty. If duty is assessed, extra fees are minimal.
Shipped courier from US. Package is held until duty plus brokerage fees are paid. Fees are much higher than those Canada Post charges.
Shipped courier with special arrangements from US. For example, UPS recently introduced a plan where you pay duty in advance, and the fees are lower than their regular ones but higher than Canada Post. It’s an improvement.
Shipped regular mail from other countries (such as China): Minimal duty and fees from Canada Post, if they bother checking at all.
Shipped DHL from other countries. It’s a bit of a crapshoot. Sometimes packages are held for duty, sometimes a bill for duty and fees owing arrives weeks later, sometimes there’s no extra charge at all.
It seems like a lot of things are getting conflated here.
Just to be clear:
Shipping costs:
The fee to ship, via courier. Or postage, via the mail.
Taxes:
Sometimes clients want you to declare it a gift, or understate its value so they save on the tax. The shipper should just refuse to do so, in my opinion. The client needs to grow up and and pay the tax. But what’s taxable and what’s not isn’t easy to determine so slip ups happen. Often. Not the shippers fault.
Duty:
This fee is determined by trade agreements and classifications. The text of which is almost undeciferable. Things often get classified one way by one shipper, and another does it under a different classification. But I can personally attest that the agency in charge can’t even decide what’s what, so there is zero consistency. Customers should assume they will owe the duty (f any applies!) and feel delighted when it’s overlooked. (About half the time!)
Freight Forwarding:
This is the fee paid for someone to attest to its contents at the border. Ups, FedEx, etc usually charge a flat $35 fee. Whereas the post office fee is $5. So, understandably, if it’s small enough we’d prefer you put it in the post!
So…
I don’t need you to misrepresent the value, as I’m not trying to evade applicable taxes.
Any applicable duty that is owed, may or may not be charged, (depending on the alignment if the planets I believe!), but is entirely out of the control of the shipper.
I would prefer to spend $5 to get it over the border, especially on anything small enough to be sent by post. (It doesn’t really seem like too much to ask, considering I’m getting dinged for taxes and duties and shipping costs. Saving $30 on the freight forwarding is def worth enquiringly about, in my experience.)
Hoping this helps! (You can see why people find it confusing!)
I’ve worked on software projects related to this topic.
One thing some companies do is to include duties and taxes in the online sale (listed as a handling or service fee for legal reasons, if listed as duty then the amount must be exactly correct) but they also reduce those duties and taxes substantially using the following method:
1 - Setup a legal entity in Canada
2 - Sell the goods to the Canadian legal entity at cost plus a small service fee (fee is required to make this transaction legit for customs, it covers the labor to prepare the shipment in the US, in theory)
3 - In the US, prepare the individual shipments/cartons to consumers in Canada (cartons/labels/packing slips/return labels, etc.)
4 - Move the cartons across the border in bulk (many online orders flowing at same time), pay duties at this time based on value that is lower than retail (cost+fee)
5 - Induct cartons/shipments into FedEx or UPS (or other) in Canada for shipment to final destination/consumer
For a brand/manufacturer, cost is about 1/4 retail (cost * 2=whsl, whsl * 2=retail) so duties and taxes are much lower and can be listed as a “handling fee” for Canadian customers that will be acceptable to consumers.
There’s also broker’s fees.
Some shippers use (used?) a customs broker, who adds their own costs to the bill, what they charge for reporting the item to customs and arranging for the appropriate(?) classifications. I’ve had this add between $10 to $40 to a minor item. One friend said they charged him by the line item, so a shipment with a number of separate small items was expensive.
Mind you, this was back in the 1980’s and 1990’s and I suspect the major shippers have improved this process, business has increased a lot, they have realized they can keep this money in-house and make things cheaper for their customers.