Going global can expand your ecommerce business’s reach and boost your revenue. But international trade faces many bottlenecks, especially the variable tariffs and duties at different borders. Every country has its own regulations and fees imposed on certain kinds of goods, and keeping up can be quite a headache. It’s therefore not uncommon for international traders to make costly mistakes.
While most of these import tax and duty mistakes are made by fledgling international traders, established brands still lose money once in a while due to some mistake.
In this article, we look at 8 tax and duty mistakes every importer must avoid:
1. Assuming Taxes Are The Same For All Countries
If you’re selling products internationally, it’s important to be aware of the various tariffs, import taxes, and duties that may apply to your products in different countries. These rates, rules, and forms can vary significantly from one country to another and can even differ between neighboring countries. For example, the duty rate for rubber flip-flop sandals may be 9% in the US and 16% in Canada, but if the sandals are made of leather, the rate may be 18% in Canada and duty-free in the US.
2. Leaving It All To Fulfillment Providers
Many companies rely on transportation and fulfillment providers to handle the complicated process of assigning tariff codes to products and calculating duty rates. However, these providers are not necessarily responsible for ensuring that the information they provide is accurate. If they make a mistake and your company falls out of compliance, you could be liable for any resulting fines or penalties. Therefore, it’s advisable to carefully review and verify any information provided by these providers to avoid potential compliance issues.
3. Going Fully Diy
While you may think that going fully DIY will help you save costs, it’s not always so. In short, trying to handle customs duty and tax all by yourself is often a precursor for mistakes if you’re inexperienced.
In contrast, external experts already know what to prepare for, so costly mistakes are minimized. For example, a trusted duty drawback company may prevent you from overpaying duties and taxes. The thing is, you may not know you’re overpaying until an expert introduces you to all that has been happening. At the end of the day, you may realize that you’ve wasted a significant amount that could have been channeled into a more beneficial enterprise.
4. Failing To Update Tax Information
Once you’ve taken the time to calculate duty rates and customs charges for your products in a new country, it can be tempting to simply leave that information unchanged in your shopping cart system. However, rates and taxable products can change over time, and relying on outdated information can lead to unexpected import taxes and refused shipments.
5. Undervaluing Shipment
Some companies try to avoid paying higher duty rates by misdeclaring or undervaluing their products. For example, they may claim that a shipment is worth less than it really is in order to qualify for lower duty rates or duty-free policies. However, customs authorities are increasingly using profiling techniques to identify and target shipments for detailed examination, and companies that engage in these practices may face delays, fines, and penalties. Countries may even revoke a company’s import/export privileges in severe cases.
6. Not Doing Enough Research On Regulated Products
Some countries tag specific products as regulated commodities and impose additional import duties on them. In many instances, the extra tax can even be more than the cost of the item itself. For example, shipping a car to Singapore can cost tens of thousands. So you want to research before shipping any item to any destination to avoid being hit by costs you never bargained for.
7. Being Careless With Documentation
International shipping generates a lot of paperwork, including various forms and documents. It’s essential to keep all of these documents organized and easily accessible, as misplacing or losing them can cause delays in processing shipments. In the event of a customs audit, having complete and accurate documentation can make the audit process smoother and less costly. Consider scanning and storing your documents digitally to make it easier to search and access them.
8. Not Anticipating And Planning For Potential Issues
It’s not always possible to anticipate changes in tax rates or other regulations, but it’s important to do your best to stay informed and plan ahead. Last-minute guesses or assumptions about taxes or other requirements can lead to mistakes that could result in delays, fines, or other consequences. Try to research and understand the rules and requirements for each country where you’re doing business, and try to anticipate any potential issues in advance.
One must realize that mistakes are inevitable but can be minimized by planning ahead. And one of the best ways to avoid mistakes is to know them beforehand. Now that you’ve familiarized yourself with the common tax and duty mistakes importers make, you can arm yourself by taking the necessary countermeasures.