7 minute read
Foreign governments add additional taxes and duties to foreign shipments. This is often done in an effort to protect domestic businesses from foreign competition, but sometimes is utilized simply to boost government revenues. Either way, it is your responsibility to ensure that proper duties and taxes are paid prior to your overseas shipment reaching customs.
The more complex part of this process is knowing when duties do not apply to your international shipment. In many cases, a taxing threshold divides shipments that require duties and those that do not. If your shipment fails to reach the specified dollar threshold—which varies by country—it can enter the country without any additional payment. The key is understanding how your package will be treated when it first arrives in its destination country. For example, all parcels sent to France worth €20 or more are subject to a 3% duty and a 20% value-added tax, or VAT. In the United States, however, the threshold is set at $800, making it a lot more affordable for international ecommerce companies to break into the US marketplace.
Here’s something many sellers may not realize when expanding to the international market: Your marketplaces may be charging you unnecessarily high exchange rates. For example, when you sell internationally using Amazon’s marketplace in Canada, or Amazon Europe and Amazon UK, you can be charged cross-border payment exchange rates upward of 3.5-4.5%. When you swap out Amazon’s rates for third-party rates, like those available through PingPong, you can cut that rate to 1.5% or lower.
With the added expenses of shipping across international borders, any amount of savings is a benefit to your bottom line.