Optimize Your International Shipping with Dynamic Duties and Taxes

Imagine that your eCommerce brand is expanding internationally. Exciting! Now the world will know your bejeweled banana suits.

Here’s the challenge: international shipping is more complex than domestic shipping. This is because every shipment that crosses international borders is subject to duties and taxes in the destination country. And since import duties and taxes vary by shipment, it’s hard to quote accurate import fees to customers at checkout.

So what happens when an international customer arrives at checkout to see a big ol’ import fee? Well, more than 6 in 10 shoppers say they abandon carts due to unexpected costs at checkout.

This common scenario is why Easyship created a new feature called Dynamic Duties and Taxes at Checkout.

This cart optimization lets you show accurate and country-specific duties and taxes on your cart page. Now you can smooth away the friction that leads to cart abandonment, plus get a better sense of your fully landed costs for international shipping.

This article explains the benefits of Dynamic Duties and Taxes at Checkout, how it's used, and what this automated duty and tax calculator looks like in your eCommerce store.

How to Calculate Duties and Taxes

Before your cross-border shipment can be delivered, either you or the customer must pay any import duties and taxes that are due. Import duties and taxes vary depending on the following factors:

• Import regulations in the destination country
• Type of goods shipped
• Value of shipped goods
• Weight and size of the shipment

Cross-border shipments are subject to both an import duty and an import tax.

Not every shipment incurs these fees, though. Each country sets an import tax threshold – known as the de minimis value – below which no taxes are due. Import duties are assessed using your customs documentation, specifically the commercial invoice, which outlines the value and category of goods shipped. A full guide to international customs paperwork is available here.

The benefit of Dynamic Duty and Taxes is that you’ll never have to calculate duties and taxes again. Why? Because it’s all automated. Shoppers see accurate, pre-calculated duty and tax rates with all shipping options without any effort from you.

In the next section, we show you what Dynamic Duties and Taxes at Checkout looks in your eCommerce store.

Choosing Who Pays For Import Duties and Taxes

As the shipper, you get to decide who pays for duties and taxes.

With Dynamic Duties and Taxes at Checkout, these duty and tax amounts are always at hand. This helps you decide who you want to pay for taxes, and provide the fully landed costs to shoppers if they pay.

Below is a screenshot of the cart customization flow in Dynamic Duties and Taxes at Checkout. This is where you decide who pays for import duties and taxes.

By selecting “Post-paid,” we determine that the receiver will pay for duties and taxes. In turn, your eCommerce cart page will automatically display accurate import and tax details.

All duty and taxes are calculated automatically based on the order specifics and destination country. This means shoppers get accurate, fully landed costs for their order – without any guesswork or manual calculations on your end.

Post-paid duties and taxes are also known as Delivery Duty Unpaid (DDU). This means that the customs office in the destination country contacts the receiver about payment for duty and taxes, if owed. All duties and taxes due must be paid by the recipient before the shipment is released to them.

By contrast, prepaid duties and taxes are known as Delivery Duty Paid (DDP). This means the sender/merchant ensures that duties and taxes are paid before the package arrives at customs.

Most merchants opt to collect duties and taxes from customers at checkout. With duties and taxes “prepaid,” packages sail through customs. Alternatively, some merchants choose to absorb these costs themselves instead of asking customers to pay at checkout.

To choose who pays for duty and tax, select either “Prepaid” or “Post-paid” in the dashboard for Dynamic Duties and Taxes at Checkout.

How to Use Dynamic Duties and Taxes at Checkout

What do customers see once you've installed Dynamic Duties and Taxes at Checkout in your online store? This depends on whether duty is owed, and who you’ve chosen to pay duties and taxes.

No Import Duty or Taxes

It’s common for low-value shipments to clear customs without any added duty or tax. This happens when a shipment is below the tax threshold, or de minimis value.

Below is what a Dynamic Checkout cart page looks for a duty-free shipment.

The cart page clearly states that no taxes or duty are due. Customers just choose their preferred shipping method and continue to payment.

Prepaid Duties and Taxes (DDP)

For the sake of transparency, it’s best to display any added fees associated with duties and taxes at checkout. When duty is owed, Dynamic Duties and Taxes automatically determines the tax amount due for customs clearance.

Below is an example cart page that shows the exact amount of prepay duties and taxes.

Tax due is displayed in the cart page below the courier option. The rate quotes for each courier include the automatically calculated duties and taxes in the final price, shown above in the Singapore dollar (SGD). The fully landed shipping price is obvious so shoppers can they can make a fully-informed purchase decision.

Added DDP Handling Fees for Merchants

International couriers charge an added fee for prepaid duties. This is because the courier must pay the import fees on your behalf at customs. You can also expect a disbursement fee, which is a percentage of the amount of the duty and tax payment advanced on your behalf. These fees are part of the elevated ‘cost to serve’ international customers, and should be factored into your cost structure.

Added costs aside, the benefit of prepay/DDP shipping is knowing your shipment will clear customs and reach the end-customer in a timely manner. For a bit extra, you can be sure that packages don’t get stuck if the recipient backpedals and refuses to pay the post-paid import fees.

Post-Paid Duties and Taxes (DDU)

Here’s what checkout looks like when taxes are due in a post-paid cart.

Instead of including the duty and taxes in the rates, an extra estimated amount is mentioned below. (Shown here in the Hong Kong dollar.) Additionally, there’s a disclaimer that tax handling fees may apply.

Displaying elevated shipping rates is the price you pay for using post-paid duties. Being upfront about costs is better than surprising shoppers and facing potential fallout and damage to your reputation. For example, increased rates of returns or complaints about hidden costs on social media.

6 Benefits of Dynamic Duties and Taxes at Checkout

Our Rates at Checkout plugin automatically calculates and displays any import tax due at checkout. This way, customers know exactly how much their shipment costs. Using our duty and tax calculator can be indispensable for international merchants in the following ways:

• Increase conversions: Shoppers regularly abandon carts because of unexpected shipping costs. Conversely, you’ll see sales increase by presenting customers will all shipping costs upfront.
  
• Clear customs with confidence: Unpaid duty and tax are the main reason shipments get delayed at customs. Shipping delays are also a leading reason shoppers say they abandon brands. Ensuring duty and tax are paid helps you ensure a timely delivery that contributes to growth and happy customers.
  
• Gain visibility of costs: Predicting duty and taxes is key to creating a cost-effective shipping strategy. Our dynamic duty and tax calculator plugin gives you 100% visibility on these costs so you can profit on every order and chart for growth.
  
• Gain trust: People expect their favorite brands to be transparent about all shipping costs. With Dynamic Checkout, you win the trust of visitors to gain them as future customers.
  
• Reduce returns: Dealing with returns is time-intensive and therefore costly for eCommerce merchants. When customers can pick the right delivery option for them based on the fully landed cost, return rates decline.
  
• Streamline operations: Shipping automation helps eCommerce merchants to save time in their busy day. This means no more calculating duty and tax for international customers by hand. Wave goodbye to slow fulfillment times and customer complaints. Instead it's easy to give shoppers the seamless experience they expect.

Optimizing eCommerce With Dynamic Duties and Taxes at Checkout

Our new Dynamic Duties and Taxes at Checkout plugin displays all duties and taxes automatically in your checkout page. We designed this feature to help merchants reduce cart abandonment, gain visibility of international shipping costs, and increase revenues.

For a step-by-step on how to install Dynamic Duties and Taxes at Checkout in your eCommerce store, click here. Or maybe you just want a hand calculating duties and taxes? Try our free duties and taxes calculator.