What are duties and taxes based on? 

The amount of duties and taxes you need to pay for a shipment are determined by several factors: 

• The HS code is used to classify the product type. Customs authorities use this commodity code to quickly understand what is being shipped and to apply relevant taxes, duties and any regulations. 
  
• The value of the goods, including freight and insurance fees, help customs to determine the duties and taxes and to clear your shipment. That's why it's essential to state the correct value on the commercial invoice. 
  
• The goods description on the commercial invoice, including the product's end-use and country of manufacture. To make sure the goods are classified correctly, the HS code and goods description should match.
  
• International trade agreements between countries can influence the amount of taxes and duties on a shipment. If you're shipping goods between nations that share a trade agreement, then they may be exempt from duties or eligible for a reduced rate.
  
• The Incoterms® on the commercial invoice define the agreement between sender and receiver about who pays for shipping costs, including taxes and duties.
  

How do customs officials assess the duties and taxes?

Customs authorities use the information on your commercial invoice and other relevant documents to determine the duties and taxes. That's why it's essential to include details like the HS code and an accurate goods value on your commercial invoice.

And bear in mind, if you’re missing information, you’re leaving it up to customs to calculate the duties and taxes on your shipment, which may result in you paying more than you should.

How to calculate import duties

First, you need to determine the duty percentage rate on the goods you're shipping. This rate varies depending on the country you're shipping to. 

To find it, visit the customs or trade tariff page on the government website of your destination country. You can usually search for duty rates using an HS code or product description. For example, the duty percentage, or trade tariff, rate on a woman's T-shirt entering the UK from the US is 12%.  

Once you have found the rate, you can calculate the duty on your shipment. To do this add up the value of the goods, freight costs, insurance and any additional costs, then multiply the total by the duty rate. The result is the amount of duty you'll need to pay customs for your shipment.

Some countries use different rate calculation methods so remember to check this on the government website or with your carrier.

How to calculate tax

First, you need to find out the sales tax (VAT) rates of the country you’re shipping to. For example, the UK has three VAT rates: 0%, 5% and 20%, which is the standard rate for most goods and services. In the case of shipping a woman's T-shirt to the UK, it’s 20% because clothing for adults falls under the standard VAT rate.

To calculate the VAT on your shipment, add up the goods value, freight costs, insurance, import duty and any additional costs. Then multiply the total by the destination country's applicable VAT rate. The result is the amount of VAT you'll need to pay customs for your shipment.