Understanding Tariffs As An eCommerce Business
by Jillian Voege
June 01, 2017
A tariff (otherwise known as a duty) is a tax levied by countries on the value of imported products. Tariffs can also be applied in conjunction with other taxes - national taxes, local taxes, sometimes even customs fees. Different countries apply tariffs to different kinds of products, it depends on the trade relationship is between the exporting and importing countries. For instance, countries that have a free-trade agreement will usually have minimal or no tariffs for many import/exports.
There are two reasons why you should know the tariffs (along with other taxes) applied to your products before you start selling and shipping them. One - tariffs are collected at the time of customs clearance in the importing country, so you'll want to collect the full price (MSRP + tariff + other taxes and fees) in advance. Second - you won't be able to clear customs unless you apply the proper tariff codes to your shipment information.
The good news is that it's fairly simple to find out which tariffs may apply to your product. We've boiled it down to two simple steps:
1. Determine your HS/Schedule B Number
Customs agents require a Harmonized System (HS) Code and/or a Schedule B number in order to identify the type of product you're shipping, so the relevant tariffs can then be calculated.
The HS Code (also known as HS Tariff Number) is a 4-6 digit code used by the World Customs Organization to identify product types. The Schedule B number is a 10 digit number that also includes your product's HS Code.
You can find your numbers here.
2. Determine Tariff Rates
Once you know your product's Schedule B and HS numbers, you can search the Customs Info Database to find out the tariff rates associated with your product. Remember, different countries apply different kinds of tariffs, so you'll need to find out different tariff rates if you're sending the same product to multiple countries.
It may be a lot of legwork to find the proper tariff rates to your products, but this information is crucial in getting your products across borders. Finding out your product's tariffs can also help inform your business decisions. It may be a better idea to open up your products to countries with free-trade agreements with yours, lest you sink money into trying to compete against protected products in not-so-friendly-and-free markets.