A customs duty is the indirect tax levied on the import or export of goods in a cross-border transaction. Customs duties are currently limited to physical goods.

Import taxes are consumption taxes established by governments. They’re typically imposed as a percentage of the selling price (plus any customs duties) and they’re imposed on both imports and intra-country sales. VAT and GST are the most common forms of import taxes.

For real-time calculation of customs duties and import taxes, yes. HS codes, HTS codes, and tariff codes are tied to a country’s specific duty rate for the specific item. Having accurate HS codes is the first step to calculating cross-border taxes.

If you don’t have an HS code, you can still estimate customs duties and import taxes at checkout with minimal input data — don’t miss a sale when you use Avalara Cross-Border Estimated. This feature only applies to new transactions; any backdated transactions will need an accurate HS-10 code to produce a calculation.

Harmonized System (HS) codes are internationally standardized 6-digit codes that denote the product category and are used to classify traded goods. Ten-digit codes, which include the HS code as the first six digits, are used to determine import duties and regulations. These codes are referred to as Harmonized Tariff Schedule (HTS) codes by the U.S., TARIC codes in the EU, and may have different names in other countries and regions. The 10-digit codes are country-specific, meaning one item will have a unique code for each country. Schedule B codes are also U.S.-specific 10-digit codes used to classify exported goods, maintained by the U.S. Census Bureau. Tariff codes generally refer to the aforementioned codes used to impose duties on imports, vary by country, and are often based on the HS system.

• Harmonized System (HS) codes — 6-digit internationally standardized codes to classify traded goods

• Harmonized Tariff Schedule (HTS) codes and TARIC codes — 10-digit country-specific codes used to determine import duties and regulations

• Schedule B codes — 10-digit country-specific codes used by the U.S. to classify exported goods

• Tariff codes — the general term to refer to the codes listed above

Delivered Duty Paid (DDP) is a shipping model in which the seller takes responsibility for paying duties and taxes. For cross-border transactions sold under this model, the seller typically collects duties and taxes upfront as part of the online checkout experience. This is how customers expect to shop online.

Delivered at Place (DAP) is a shipping model in which the buyer takes responsibility for paying duties and taxes. For cross-border transactions sold under this model, the buyer typically pays duties and taxes upon receipt of the goods. This can lead to unwanted surprises and even rejected orders. Under this model, the seller is only responsible for the physical delivery of the goods.

A de minimis threshold is the valuation ceiling for goods below which no duty or tax is charged and clearance procedures, including data requirements, are minimal. De minimis thresholds for customs duties may be different than the threshold for import taxes for the same item. There are many factors that go into whether a shipment would be free from duty and/or taxes, and de minimis thresholds can be updated frequently. Assigning accurate tariff codes is the first step to prepare for these changes since a change in a de minimis threshold does not equal a change in tariff code.

Calculating customs duties and import taxes in real time at checkout helps reduce the risk of abandoned carts, products stuck in customs, and a bad buyer experience. By providing your customers with a more accurate landed cost, you’re providing them with a seamless online buying experience consistent with shopping domestically.