Do you want to make the most of your online shopping budget? Many Canadians enjoy cross-border shopping because US stores often offer the best deals. However, only a few know how duties are calculated in Canada and why understanding these fees is essential.

In this blog, you'll learn everything about customs duties calculation.

Key Takeaways

• Calculating duties and taxes involves five steps: determining item value, identifying applicable fees, assessing duty, tax calculation, and totalling customs costs.
  
  
• Knowing your customs fees upfront can help you ensure compliance with customs rules, plan your budget effectively, and avoid delays or seized packages.
  
  
• A cost-effective package forwarding service can help you reduce your overall shipping costs.

How Are Duties And Taxes Calculated in Canada

Customs duties are government-imposed fees on items entering Canada, regulated by the Canada Border Services Agency (CBSA). They are mandatory and must be paid when shipping goods into Canada.

As a cross-border shopper, it’s essential to understand how customs fees are calculated for your packages to avoid surprises and ensure a smooth delivery process. Here's how you can calculate them:

1. Determine The Value of The Goods

The first step is to declare your purchased goods, which includes determining their value, description, and country of purchase. If the total cost of your item is in US dollars (USD), convert it into Canadian dollars (CAD) for easier calculation. (Exchange rate changes every day).

Remember that it's crucial to be accurate with your product declaration because CBSA will use the information you provide to assess your duties and taxes.

2. Identify Applicable Duties And Taxes

Once you've declared your items, you must determine the applicable customs fees to know what to compute. Here are the types of customs duties and taxes that may apply to items shipped to Canada:

• Customs Duty. These are taxes imposed by the government on goods entering Canada. The rate depends on the type of goods and the country of origin.
  
  
• Goods And Services Tax (GST). This 5% federal sales tax applies to most goods and services purchased in Canada, including those bought online.
  
  
• Provincial Sales Tax (PST). Some provinces charge an additional sales tax on top of the GST. The rate varies by province and typically applies to many of the same goods and services as the GST. Here are examples of provinces with different PST rates:
  
  

• Harmonized Sales Tax (HST). In some provinces, the HST combines the GST and PST into a single tax, typically ranging from 13% to 15%. This simplifies the process by eliminating the need to pay two separate taxes.

Note that some items, such as items for personal use, are exempt from paying customs duty as long as they are qualified under the personal exemption requirements.

3. Calculate Duty

If your product is subject to customs duty, check how much you'll need to pay to avoid issues when your package arrives at the port.

Here is a calculation example:

1. Your purchased item costs 150 USD and needs to be converted into CAD.
   

2. Now, multiply the item's value in CAD by the duty rate of 17%.

You can expect to pay an additional customs duty of 36.72 CAD on your items subject to duties. However, that's still not done, as the next step is to calculate the applicable taxes.

4. Calculate GST And PST/HST

After learning how much your customs duty is, you should now calculate the applicable taxes on your items.

Here's the continuation of the example earlier:

1. Find the sum of the item's cost and the duty amount
   

1. To calculate the tax amount, find the item's product with the duty amount and tax rate. Remember, the tax rate is 13% for personal and 15% for business shipments.

5. Total All Fees And Taxes

For the last step, all you need to do is add your product's total costs, duty, and tax amount you've got with the computation earlier. Below is the example's calculation:

Expect to pay 285.57 CAD, which covers your item and customs fees. Note that this amount does not include shipping fees yet. That's why it's best to choose a cost-effective shipping partner that can help you save on overall shipping costs.

You can use an online duty calculator to estimate your customs fees easily and avoid the lengthy calculation earlier. Simply declare your items and the calculator will provide your estimated customs costs.

Why You Must Know Your Customs Fees

Being aware of the customs fees you'll pay on your packages is essential, and here are the reasons why:

1. Ensure Compliance with Customs Rules

Depending on your item declaration, all packages entering Canada may be subject to customs duties and taxes. Paying these fees ensures you follow CBSA customs rules and helps your package clear the border smoothly.

2. Plan Your Budget Effectively

Knowing the total amount you'll need to pay is helpful if you're setting a budget for your online shopping and won't be surprised by the customs fees. As mentioned earlier, check if your items qualify for personal exemptions, as this can reduce your overall costs.

3. Avoid Delays And Seized Packages

Customs delays can be frustrating and costly. If your applicable duties are unpaid, customs officials may hold or seize your packages. Staying informed about how duties are calculated and ensuring timely payments can prevent unnecessary delays in receiving your shipments.

How Can You Pay for Your Customs Duty

It's time to pay after learning the importance of calculating your customs duty and tax. Here are the two ways you can do to settle your customs fees:

1. Pay Online

Online payment is the most convenient way to pay your fees. You can use a debit or credit card through the CBSA Assessment and Revenue Management (CARM) webpage or choose a shipping partner that handles customs clearance and offers online payment.

2. Pay In-Person

If you prefer to pay duties personally, you can pay in cash at the CBSA port when your package arrives. Note that it's best to have the exact amount ready to avoid issues.

Why You Should Choose Shippsy

Shippsy is a trusted package forwarding service for shipping goods from the US to Canada. Here are the top benefits you can enjoy with us:

Affordable Shipping Fees

We are the cheapest cross-border shipping solution, with rates ranging from 7.99 CAD to 8.99 CAD, helping you save more. Plus, we offer a 25% handling fee if you complete three (3) shipments on the same day (vary per location).

Efficient Customs Clearance Assistance

Shippsy handles the customs clearance process for your packages, saving you time and effort. By accurately declaring your items with us, you can relax knowing that we'll ensure your package clears Canadian customs smoothly and safely.

Final Thoughts

Calculating duties and taxes may feel complicated at first, but once you understand the process and its importance, online shopping becomes easier. Use the insights from this blog and rely on a cost-effective shipping partner to manage your cross-border customs fees confidently.

Jay Alagon

Jay Alagon serves as the business manager at Shippsy, where he aims to provide Canadians with access to all US retailers without worrying about high shipping costs, long delivery times, and complicated paperwork associated with cross-border shopping. Outside of work, he enjoys practicing martial arts and woodworking.

Read all posts written by  Jayson Alagon