Shipping internationally opens new opportunities for a business as it expands the reach and boosts the bottom line in the long run.
But venturing into the foreign trade landscape is easier said than done. The paperwork can be cumbersome, and tariff and duty rates are even more complex.
The most daunting aspect is that every country has its own regulations and rates, so you cannot take a one-size-fits-all approach to sell overseas.
Moreover, businesses from different domains have to deal with diverse compliance challenges as they enter foreign markets.
While there is no magic bullet for overcoming these concerns, you can follow a few simple measures to stay on the right side of shipping duty regulations.
Here are some expert-backed recommendations to avoid costly tariff and duty mistakes and run your operations smoothly.
Table of Contents
Understand that taxes and duties vary
Entering a foreign market is a complex task, and you cannot follow the same road every time you explore a new one.
You need to understand that every country has different tariffs, taxes, and duty obligations. Further, the rates, rules, and forms differ.
Customs procedures also change at each international border. Moreover, compliance can look drastically different even in neighboring markets.
Dig deep into the details every time you start trading in a new country so that you do not miss out on the compliance front.
Update the tax information
Getting accurate customs charges and duty rates for your product catalog is tough enough. But things get even more complicated because these charges and rates change down the line.
A rate that was valid a year before may not be correct today because of the changing economic scenarios around the world. However, you may fail to update them in your shopping cart system without any idea of the changes.
Unfortunately, most business owners get complacent on this front and end up going wrong with their tariff calculations.
You may even encounter refused shipments or penalties by relying on old rates. Keep track of the latest tax information of your markets, and update your systems every time there is a change.
Stick with the documentation requirements
Documentation is another key concern for business owners buying or selling in foreign markets.
International shipping entails a lot of paperwork, and the endless forms and documents may cause frustration.
But you cannot skimp on the documentation requirements as it can land you in deep trouble. Remember to fill out each form with complete and correct information.
Also, file and store them properly as you may need the papers down the line. Missing the paperwork or not providing it when requested can cause significant delays in processing shipments.
You must also have them in place in case you encounter a customs audit. Having the supporting documentation to validate your international transactions can get you a clean chit.
Seek expert assistance
Handing your duty and taxes alone sounds alluring as it may save you some money.
Many business owners start with a DIY approach, only to realize its downsides sooner than later.
But you may end up paying massive penalties by making mistakes with your paperwork and calculations.
A wrong tariff code classification can be problematic. You may even make mistakes and pay excess taxes. Luckily, you can claim duty drawback for overpayment of taxes.
But everything boils down to having an expert to show you the way.
A professional knows the nitty-gritty of tariffs and taxes for the local market, so you need not worry about going wrong with the calculations and documentation.
They can also help you with drawback recovery.
Avoid misdeclaring and undervaluing goods
Many business owners deliberately undervalue goods or falsely declare one type of item as another.
The proposition sounds tempting as you may sneak in under low-value or duty-free customs policies with a false declaration.
It also seems harmless because you may actually manage to do it a few times. Although you may get away with such wrong practices, the risk of being apprehended is always there.
If the authorities notice the tactic, they can levy massive fines and penalties.
Rest assured, they will be suspicious sooner than later. Being under the lens can cause customs processing delays for current and future consignments.
The worst part is that you may lose your reputation as an international provider.
Get your tariff codes right
Getting your tariff codes right is perhaps the trickiest aspect of calculating customs duty on your consignments. It gets even more time-consuming if your catalog comprises multiple products and you ship to different countries.
You have to assign the correct tariff code to each product for each country you ship.
The digits in tariff codes vary by country, and you cannot expect to memorize them, no matter how good you are with numbers. Handling the task can take loads of time and effort, but it is worthwhile.
Assigning incorrect codes can cause customs delays, returned shipments, and unanticipated extra costs, which are the last things you want to deal with.
Check each new product individually to ensure the correct codes.
Research regulated products
Another essential aspect of staying on the right side of shipping duty is to research regulated products.
Many countries flag specific products as regulated, which means you may have to pay additional duties and charges on these products.
The cost differences can run in tens of thousands of dollars, and they can significantly affect your bottom line.
The confusing part is that regulated items vary from country to country, so rates may vary for different destinations.
For example, a product may be regulated in one country and duty-free in another. You must invest in in-depth research to stay compliant.
International shipping is complex, specifically when it comes to documentation, duties, and taxes.
But awareness and knowledge puts you in a good place and help you prevent compliance bottlenecks in the long run.
Also, remember that things may vary depending on the product and market you operate in. Follow these steps to ensure compliance from start to end.
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