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Here is something that I have recently experienced when shipping and exporting items sold on eBay to International buyers from Canada, United Kingdom and other countries........
Let's just say you sold an electric shaver for $340.00 to an international bidder. Shipping costs was $50.00 and insurance was an additional $10.
The winning bidder may think they only need to pay $400.00 for the item. That is not at all true because most countries charge a Duty Tax and some charge a Value Added Tax (VAT). And some countries (unfortunate to those bidders in that area) charge both (for example: United Kingdom).
What if you mark the item as a gift - will they get a break? Nope. They will still get charged even if it is sent as a gift.
What if you under-declare the value of the item to $5.00? That's a bad idea because if the item is damaged during transit (which happens when you least expect it). That $340 shaver will only be insured for $5.00. Then you just lost all of your money (except for $5.00 which you listed as it's declared value on the customs form) because you are stuck with a damaged item (which is sometimes returned to the sender) and you must refund the client the full amount. Protect yourself and the buyer - NEVER under-declare or mark down the value of the item. Always list the declared value of the item at the price the item was won.
What if you raise the declared value of the product? Another bad idea, because you get an unhappy bidder on the other end. They would have to pay taxes on that valued item you stated on the customs form. If you plan on doing that then make sure it is stated in your auction. I usually mark the value of the item to nearest whole dollar dependent on the winning bid.
To my knowledge, there is no way to bypass these taxes when you export items from the United States. Each country has certain laws and it's good to check and see if the item you have just sold will pass through customs.
Now let's get back to calculating those two tax values (Duty & Value Added Tax) in 3 easy steps (Please note: these are estimated charges):
Step 1:Calculate the Total Value -------------------------------------------------------------------------------------------------------------------------
Invoice (Electric Shaver) Value: $340.00
Insurance: + $10.00Freight Paid + $50.00
-----------------
Total Value: = $400.00
Step 2: Calculate Duty Tax --------------------------------------------------------------------------------------------------------------------------------
Duty Rate is currently @ 7%
of the Total Value
Duty Charge [($400.00 x .07] + $28.00
-------------------
Total Value + Duty Charge = $428.00
of the Total Value
Duty Charge [($400.00 x .07] + $28.00
-------------------
Total Value + Duty Charge = $428.00
Step 3: Calculate VAT (Value Added Tax) -------------------------------------------------------------------------------------------------------------
VAT Rate is currently @ 18%
of the combined Total Value &
the Duty Tax
VAT Taxes [$428.00 x .18] + $77.04
of the combined Total Value &
the Duty Tax
VAT Taxes [$428.00 x .18] + $77.04
------------------
Total Payout for Electric Shaver:
($400.00 + $28.00 + $77.04) = $505.04
******The international bidder must pay an additional $105.04 in duty and VAT taxes.
SUGGESTED TIPS:
TIP #1:
To protect yourself from being blind-sided by emails about any hidden charges - as a courtesy - always state that you are not responsible for any Duty, VAT or additional taxes that may be charged after the sale in your auctions. It is the sole responsibility of the international bidder to check local regulations when buying exported goods.
TIP #2:
Always check that the item you are selling is allowed to be shipped to that country. For example: certain toys are not shipped to certain countries because of the material the toy is made of. For example: Italy's customs regulations for toys - only allow toys wholly made of wood into the country (no plastic, metal or exceptions) - they will destroy the toy if it is discovered by customs agents. If the toy is destroyed, the seller looses in the end.
Go to USPS.com and find the "Index of Countries and Localities"- "Select a specific country by selecting the numeric number in blue beside the country":
Read Prohibitions section (This is the section to read what is allowed and not allowed into that specific country)
Read Restrictions section (This informs on what restrictions and guidelines that must me followed)
Read Observations section (This explains certain rules and regulations when shipping items into the country)
Read Restrictions section (This informs on what restrictions and guidelines that must me followed)
Read Observations section (This explains certain rules and regulations when shipping items into the country)
TIP #3:
Inform all your winning international bidders after the sale that there are additional taxes he or she must pay when they pick up the item at customs or during delivery. It is good business practice to reassure the buyer about additional taxes.
TIP #4:
Want to boost international sales - If you have a few repeat international customer's - lower the value of the item so they don't get hit as hard on the Duty and VAT taxes. Please note: this may be risky and only suggest that you do this with your repeat customers that you have built a friendly relationship with. That's the biggest complaint from international bidders that they have to consider the "additional" monies they must pay upon receiving the product. Why not give your international friends a break - you don't get any of that money anyways and you gain a repeat customer. It's a gamble on your part and if the package is damaged - your claim is only worth what is stated on the customs form. I am aware that it contradicts what was stated at the beginning of the guide - but then again it's a "suggested" tip.
TIP #5:
Did you know marking a product as a "GIFT" on the customs form is illegal? It's only eligible if that person is a considered a friend, a member of your immediate family or somehow related to you. If your package is opened and it doesn't look like a common gift (i.e.: twenty calculators and 200 pencils) then they may blacklist you and open all your packages going into the country. Also, if you ship items with company logos, stickers and business cards those packages are more likely to be rifled through.
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Guide created: 11/19/07 (updated 11/10/09)
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