How does Shopify calculate the import duties in checkout?

[casperhillstrom]

Shopify allows us to add the required Harmonized System Code (HS code) and the Country of Origin (COO) to a product and variant to fulfil and ship internationally. We are located in Denmark, so these data are obliged for us to ship outside the EU - i.e. shipping from Denmark to the United States.

In Shopify -> Settings -> Taxes and duties, you can allow Shopify to Collect duties and import taxes in certain countries where duty payments are required. Everything seems to work fine so far; however, we face some issues:

1. Some products are being charged duties, and some products are not.

2. The amount Shopify charges are not always the amount the courier charges us.

I tried to check if there is anywhere Shopify shows how the duty is calculated, but I need help to get through. Both at the checkout and on the order page, Shopify doesn't show how the duty is calculated and from where the information is received. 

Does anyone know is Shopify will be more transparent in the future?

[Victor]

Hi @casperhillstrom,

Thank you for your message. Shopify calculates taxes and duties based on the product information. Most calculations rely on the Harmonized Codes provided, the Country of Origin, and the buyer country's (or sometimes province or region). As a note, orders shipping to Switzerland calculate duties based on item weights as well.

If a harmonized code is not available for a product, Shopify will estimate the taxes and duties based on additional product information such as the product's type, its title, and its description. HS codes provide more accuracy so we recommend uploading them or performing reconciliation with carrier invoices to monitor and resolve discrepancies.

Please also be aware that ,ost countries have thresholds below which taxes and/or duties do not apply. As an example, shipments from US to Canada below CAD $40 are not subject to taxes or duties. This is likely why you are seeing some orders without duties attached.

[casperhillstrom]

Hi @Victor 

Thanks for getting back to me quickly. 

I completely understand the purpose of the HS codes and the importance of having them all added to our store's products/variants. But I am afraid that your reply still doesn't answer my question.

What I'm asking about is some kind of documentation on how Shopify calculates the duty for each individual order.

Let's say that a customer asks us "why is the duty amount on 34 USD?". I wouldn't have a reply since Shopify doesn't give us this transparency. Some basis of the duty calculation would make us able to explain our customers and understand why the duty amounts are as they are.

I hope the above makes sense.

/Casper

[TeemuEAS]

Hi Casper! 

I am from an EU + UK VAT Compliance Solution company, EAS Project, and we are very familiar with the related tech and legal issues of your question. 

Short answer is, that there is a link to relevant database which contains the details on the duty and tax levels. You can check individual rates for example here: https://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en

The couriers have their own calculators and HS code checks which can result in difference between Shopify and final cost. The couriers will always retain the right to modify the data, including HS codes. They are responsible for the customs process and liable for the data. Unfortunately they sometimes override your checked data as you mentioned. You have to bring the matter up with your courier. 

One notable issue is that only Shopify Plus handles duty calculation. For our clients not using Plus, we generally simply advice them to simply absorb the duties, which might mean having to increase the price. We assist in getting VAT collected at checkout, which is already the bulk of the taxes.  

I am happy to further elaborate, just get in touch with us. 

https://apps.shopify.com/eas-eu-compliance

Teemu

[casperhillstrom]

Hi @TeemuEAS 

Thanks for the reply.

What I don't understand is how the carriers and Shopify can get different results. If you have a t-shirt, made in Portugal, and ship it from Denmark to United Kingdom, then the duty amount should be the same no matter who is doing the calculation. It doesn't make sense that the duty amount can be different results.

I tried the database you linked to with a T-shirt (HS code 610910). There were no results/match. Also, I cannot find how to calculate a duty example to a specific receiver address.

Otherwise I appreciate your explanation!

Best regards,

[Victor]

Hi @casperhillstrom,

For sure, and I understand why you would prefer more transparency on how these duties are estimated and calculated. I do not have more information on this process but will submit your feedback to our development team.

[casperhillstrom]

Hi @Victor 

Thanks for getting back. 

Sounds good. Perhaps Shopify could also cooperate better with the carriers, such as UPS. I know that they offer the duty calculation insights via API. Could be some way to double check the calculations and show us (the merchants) how the duties are (and will be) calculated.

And even better some reporting with the average duty fee in % so we know how much to increase the sales prices.

Best regards,

[Victor]

Hi @casperhillstrom,

Thank you for your suggestions and I will be sure to pass them on to our team. I can see why what you have suggested would be helpful.

[Rostislav]

Hi Casper,

Calculating duties is a bit of an art. And that art is applied differently by Shopify and your courier.

I can give you an example. Sales between EU and UK are duties free for goods of respectfully UK and EU origin (as per bilateral EU-UK agreement after Brexit) . The origin of goods can only be truly confirmed by  a Certificate of origin, which you do not have and if you have it you never put it  into the parcel.

Shopify  considers data provided by you and your statement of the goods origin so they see situation on duties like that (UK - zero rate )  :

But the courier will look at it from the documentation point of view - no Certificate of origin , no preference and they fall back to ERGA OMNES rules  (that cover all other situations) :

 Thus for the same product you end up with different duties and different VAT amount. 

You can always check the ERGA OMNES rules in any of the open EU databases, we use the Finnish customs one :  Fintaric - Goods tree (tulli.fi).

So that way you get the worst case scenario. But of course it does not mean that the same rules will be used for non- EU countries . And as our Shopify advisor stated in some countries like Switzerland the duties calculations are based on the weight and the minimum cost threshold.

You still can consider these factors in shipping rates for particular countries , but it is always a bit of an art 🙂

www.easproject.com - the best EU and UK compliance solution for Shopify.