What is Customs?
Customs is an international shipping term that commonly refers to the government authority or agency that is in charge of the import and export of goods from one country to another. Most importantly, customs assess and collect any duties, taxes, and fees for incoming goods.
The cost of those fees, duties, and taxes will depend on the customs agency of the country you’re shipping to. However, each country will require certain pieces of paperwork in order to properly assess the goods to determine the amount owed on them.
Who Pays Customs For International Shipping?
Duties, taxes, and fees required by customs can be paid by either the product seller or the buyer. Either way, this is usually determined before the shipment arrives to customs.
When the seller pays for costs required by the customs agency before the goods are shipped, that is referred to as Delivery Duty Paid (DDP). When the buyer pays those fees before the products are shipped that is referred to as Delivery Duty Unpaid (DDU).
There are pros and cons to each of these strategies for online sellers. When choosing DDP, you can help save time and entice your customers to buy your products. However, if you’re shipping internationally a lot, this cost could add up quickly.
If you choose the DDU method, you can help save your business money on these fees. However, you risk your costumes abandoning the cart because the total shipping costs will be too much.
A common way e-commerce merchants combine the two is by adding in the cost of paying customs directly into the cost of the product.
However, in some cases, there might not be any fees required by the customs agency depending on the country, what you’re shipping, and the amount you’re shipping.
Common Paperwork Required By Customs
Some common forms you’re need to fill out before shipping internationally are:
- Commercial Invoice — The primary legal document used for calculating and assessing the total amount of duties, taxes, and fees.
- Packing List — This is an optional document that gives customs and all parties involved in the shipment of the product more detail on the shipment/product itself. A lot of the same information from the commercial invoice is used but Customs will use the commercial invoice.
- US Certificate of Origin — This certificate is used to verify the manufacturing country of the items being shipped. This document is not always required depending on the origin and destination of the item. Though if the product was made and is being shipped out of the U.S., a certificate of origin will be needed.
- Electronic Export Information — This is a document that the U.S. Customs and Border Protection (ACE) usually requires for exports that have a single item valued at more than $2,500.00. These documents are filed online ahead of time.