When you ship goods across international borders, one of the first things you need to work out is what duties and taxes you might expect to be faced with. Whether or not you choose to pass these costs on to your customers, it is important to understand what factors are involved in calculating duties and taxes, and how much you might be charged.
❝Consumers want to know upfront what their shipping costs will be, and retailers are responding accordingly.❞
📚 Read more in the Shippit State of Shipping report
This article covers the Harmonized System (HS) codes, the landed cost guarantee, and how duties and taxes are calculated when you ship with Smart Routing International. For more information about Smart Routing International, see the About SRI article. For more information about incoterms, see the Understanding incoterms article. For more information about shipping orders internationally with Shippit, see the About international shipping article.
Harmonised System (HS) codes
The Harmonised System (HS) is a globally standardised numerical system used to classify traded products. It functions as a common language for goods, enabling customs authorities, businesses, and governments around the world to identify and describe products consistently.
Australia uses HS codes with 2 extra digits to classify goods that are being exported from Australia. These are called Australian Harmonised Export Commodity Classification (AHECC) codes.
The primary purpose of HS codes is to streamline customs processes, assess duties and taxes, collect trade statistics, and implement trade policies. HS codes can also be used for:
Internal taxes and regulations
Monitoring controlled goods
Rules of origin determination
Freight tariffs and transport statistics
Economic research and analysis
It's important that you select the correct HS code for your shipments. Make sure you are declaring the correct HS code to avoid additional fees, or border seizures.
MID codes
Manufacturer identification (MID) codes are unique identifiers assigned to the manufacturer of goods, and they are used as an alternative to the full name and address of the manufacturer or exporter of the items you are shipping. Some customs authorities use MID codes to track the origin of goods, to enforce trade regulations and ensure product safety.
If you ship goods to the United States of America you need to include a MID code for Customs and Border Control (CBP) to provide import clearance. For shipments to other destinations, a MID code is generally not required.
🚨WARNING: The United States requires an accurate MID code to provide clearance. Without it, your goods could be returned or destroyed. There is no central database of MID codes. The most reliable way to obtain a MID code is to directly ask your manufacturer or supplier
Landed cost guarantee
Working out what duties and taxes need to be paid can be a complicated process. To make this simpler and to prevent surprises, you can take advantage of Shippit's landed cost guarantee. The landed cost guarantee ensures that the cost you pay for exporting goods is the final amount, and includes all duties, taxes, and fees.
Shippit integrates with a number of partners that allow us to provide a complete breakdown of duties, taxes, and fees that make up a total landed cost, including the sum of duties, taxes, and additional fees from customs, brokers, or the shipping carrier. Landed cost simplifies an otherwise complex method for calculating duties and taxes on international imports, and ensures no additional charges.
If you want to take advantage of the Shippit landed cost guarantee, you must provide an accurate HS code.
Calculating duties and taxes
For orders booked through Smart Routing International, duties and taxes are calculated based on the product description and HS codes of the items you're shipping. For orders on our partnered rates, we integrate with Zonos to calculate duties and taxes, and the calculations include reduced rates, simplified rates, and the impact of de minimis values.
Providing HS codes can increase the accuracy of the calculation, and is required if you want to get a full landed cost calculation.
For more information on how to add your tax identifiers in Shippit, see our DDP and DDU article.
Country of origin
Where you ship your goods from, and where your goods are manufactured, can change how much you are charged when your package moves across borders, so it is important to understand the distinction between country of origin, and shipping origin.
The shipping origin is where the goods are shipped from. This is usually the location of the warehouse, supplier, or fulfilment centre that you are shipping your orders from. This information is used mostly by carriers and logistics systems for routing and transit purposes.
The country of origin is where the goods were manufactured, produced, or substantially transformed. This information is important for customs, tariffs, trade agreements, and labelling.
For example, if your goods have a country of origin in China, but you are shipping them from Australia into the United States, you might face tariffs based on the country of origin, not the shipping origin.