Grow global: 5 reasons to automate customs duty and import tax calculation

Today’s customers no longer tie themselves down to vendors in their city — or even in their country. Global ecommerce and the rise of shopping cart software make it easier than ever for businesses and consumers alike to place orders from around the world.

Soon after starting to ship overseas, though, many companies find they may have bitten off more than they can chew. Complicated duty rates, import fees, value-added tax (VAT), and other import taxes can increase landed cost (the total cost of an international shipment), often unexpectedly.

In this whitepaper, we’ll look at five ways calculating customs duty and import taxes using an automated solution, like Avalara AvaTax Cross-border, can improve your overall compliance, your bottom line, and your relationship with international customers.

#1: Reduce the risk of rejected shipments 

Some companies think that once they’ve calculated duty rates, they’ve got international tax compliance covered. The reality is much more complex. Duty rates and the original item price aren’t the only components of a landed cost calculation. VAT and country- or item-specific import fees can drive up costs, creating the potential for sticker shock when your shipment arrives at its final destination.

Failing to calculate even one aspect of the total landed cost can lead to difficult situations. If your company’s policy is to pick up the tab for these extra fees, those costs are passed on to you. If a customer is on the hook for more money than expected at the time of purchase, that customer may choose to reject the shipment and send it back for a refund.

When shipments are rejected, it’s a pain for everyone involved. With a fully automated calculation engine, you can reduce the risk of shipment rejection. By taking into account not only duty rates but also import taxes such as VAT or GST, AvaTax Cross-border helps avoid “surprise” costs for you and your customers.

#2:  Save time with every shipment

Trying to untangle the tariff codes, import duties, local taxes, and de minimis (minimum value before duty is charged) for shipments isn’t easy. Not only does every country have different rates and rules, these rates and rules can change significantly from product to product in your catalog.

While calculating these rates manually might work for a business that only makes international sales to one or two countries, or sells just a handful of products, every expansion of your customer base or your product line adds complexity to your international tax compliance picture. By automating the entire process with Avalara’s cross-border solution, you can significantly reduce the growing pains associated with shipping more products to more countries.

#3: Keep customs authorities happy

As countries around the world seek to increase tax revenue, auditors and tax enforcement personnel are being hired to make sure scofflaws are caught and made to pay. When companies avoid paying the taxes and duties they owe internationally, the penalties can be severe — up to and including being banned from making shipments to the country where taxes were avoided. Even if you’re allowed to continue doing business there, fines and additional fees may also be assessed if you’re found to be out of compliance.

That’s the kind of situation that doesn’t make anyone happy. By automating customs duty and import tax calculations, you can reduce your compliance risks with customs authorities.

#4: Build customer relations

Some companies that ship overseas don’t think they need an automated solution to calculate customs duty and import taxes. These tend to be companies that charge the customer any duties or taxes owed, and typically don’t consider themselves responsible for calculating them.

However, today’s ecommerce world is more competitive than ever before. Even if buyers don’t reject shipments outright, unexpected costs will always decrease customer satisfaction. By providing each customer with a complete view of the taxes and fees associated with their purchase, businesses can make customers happier.

Using AvaTax Cross-border allows you to include the cost of import taxes and duty as part of an invoice, reducing the risk of surprise fees and rejected shipments.

#5: Stay up to date with changes

Just when you’ve finally gotten a handle on the duty and VAT rates and rules for one of the countries where your customers live, you spot a newspaper headline: “VAT changes expected.” As national governments seek revenue sources and try to stop tax violators, frequent changes to tax and import fee rates and rules are the rule, not the exception.

Keeping up with newly proposed legislation and following rule changes is the only way to ensure your duty rates and tax calculations are current. With AvaTax Cross-border, you never need to worry about manually updating a new rate. The peace of mind that comes from regularly updated cloud-based software, plus Avalara’s experience as an industry leader in international tax, gives you more confidence than ever in customs duty and import tax calculation.

For information on how automation can make it easier for your business to grow global, learn more about Avalara’s cross-border solution.

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