With the growing popularity of online shopping, international shipping is becoming more and more common. With the internet it’s possible to furnish your home, or fill your closet with items from around the world with just a few clicks. For years cross border shoppers have benefited from different currencies and exchange rates, and the internet provides an opportunity for anyone to benefit regardless of where you live.
With international shipping however, there are often extra costs involved that could negate any savings when buying or shipping internationally. We’ll explain these costs below in the hope you’ll be able to decide whether that great deal you’ve found online ends up being as good as it looks.
When receiving a product purchased internationally, you are essentially becoming the importer for that product. Depending on the type and value of the product, tariffs, duties, and local taxes may be applied. These costs are extra to any shipping and handling costs you may have already paid. Here are some general rules and exemptions for duties and taxes. In Canada, items valued over $20 will be assessed GST,HST, and duties, with the exception being gifts valued under $60 which are tax-exempt. In the United States there is no duty on items valued $200 or less.
Lets look at an example. John, a Canadian on vacation in Seattle, WA, has found a great deal on a guitar (valued at $500) and needs to get it home to Vancouver, BC. If he was to drive the guitar over the border himself, the Canadian border services will apply GST, PST, and a 6% duty based on the value of the instrument.
Now if John wanted to ship the guitar to Vancouver from Seattle, he would be assessed all of the above taxes and duties, and depending on which international courier he used to ship the guitar, a brokerage fee would apply.
What is a brokerage fee?
When importing an item, there is paperwork to fill out, and duties and taxes to be paid before the item can leave the border (port, airport, etc). Furthermore, it is not the port’s job to inform you when your package arrives, so you would be required to know when an item was due to arrive, and follow up after the arrival date. Packages received at the border could be subject to inspections and held for days, or even weeks. A broker handles all of this extra work, expediting the customs process and making sure your package gets to your door quickly. The price for this convenience can be hefty, as the brokerage fee can be up to 50% of the products value!
Pro-Tip: When shipping between Canada and the United States, try to use Canada Post or the USPS. Due to their relationship with their respective governments, they rarely charge brokerage fees, or if they do they tend to be significantly less than other international courier companies.
Back to John and his guitar, adding a 30% brokerage fee brings his total international shipping cost to $213.60, turning his $500 guitar into an over $700 guitar.
What about NAFTA? Isn’t there a free trade agreement?
If your product was made in Canada, Mexico, or the United States, than it may qualify for NAFTA when being shipped between these countries and be exempt from duties and tariffs. The confusing part comes in trying to define the word “made.” Explaining the intricacies of NAFTA would require it’s own post (more like a textbook), but to greatly oversimplify it, depending on your type of product a different percentage of the materials used to create it must be from a NAFTA country for it to qualify.
In the case John’s guitar, over 50% of the cost of materials used must be from the United States for it to qualify. Assuming John’s guitar does qualify as American made, he would not be subject to the 6% duty, he would however still have to pay tax and, depending on the courier, a brokerage fee.
Pro-Tip: Use this handy duty calculator to figure out how much duty will cost before you buy and ship an item!
How can you save money on international shipping?
There are a few ways that you can cut down on the costs and save on international shipping. First, make sure you use ShipGooder to compare international shipping rates, to ensure you are starting off with the best quote. Next, check to see if the product can qualify for NAFTA or other exemptions. This will be more suited for unique or specialty products or items and hopefully the retailer or manufacturer can answer questions about it’s origins. Another way to save on international shipping is to broker the package yourself. This will take some time and effort, but will save you money on brokerage fees.