The United States is home to the most active online shoppers in the world. With e-commerce making exporting easier than ever, you should definitely consider offering your products to the US market.
However, while the opportunity is present, the cost of getting your products across the US border can cause some serious financial repercussions if not properly accounted for. One of the highest costs that you should factor in is shipping from Canada to US customs fee. Read on to learn how it works and how you can lessen your bill.
Understanding Duties and Taxes
Duties and taxes are something exporters need to pay the country to where they send their products. These fees vary depending on the country and are imposed for the following reasons:
- Safety of the state — The state charges duties and taxes to make sure that no harmful or prohibited products enter the borders.
- Safety of local businesses — To promote local businesses, the state imposes additional fees on foreign products. The difference in price will encourage residents to patronize cheaper, locally made items.
- Income generation — Since the items are not produced locally, the state cannot collect business tax (among other taxes) from them, hence the tax on the imported product.
The Harmonized Tariff Schedule of the United States determines the applicable tariff fees for every kind of item that crosses the US border. These charges, however, are not exclusive to shipped items. Duties and taxes are likewise imposed on international items brought home by local citizens. However, for the purpose of this article, we will place more focus on the US–Canada shipping of packages.
Either the buyer or the business owner can do the clearing of duties. Fortunately, most couriers also function as custom brokers and handle the fees and paperwork on behalf of the customer. Stallion Express, for example, specializes in small business shipping from Canada to the United States.
What to Prepare Before Shipping from Canada to the US
If you're from Canada shipping packages to the United States, you must first have a clear set of arrangements with your client and partner courier. Be sure to ask the following questions:
- Who will shoulder the shipping costs?
- Will the delivery be postal or door-to-door?
- Are the documents complete and accurate?
- How long does standard shipping from outside Canada take?
The following documents should also be prepared:
- Bill of lading
- United States–Canada–Mexico Agreement certificate of origin
- Commercial invoice
- Electronic Export Information (for items more than $2,500 in value)
- Importer/exporter license and ID number
- Customs documentation
For the customs documentation, specifically, the following information should be provided:
- Complete information of the seller (name, address and contact information)
- Type, quantity and weight of item(s) being shipped
- Price (in US dollars)
- Country of origin (in this case, Canada)
Providing the necessary documentation before shipping will help you avoid delays and facilitate the faster approval of the customs clearance. It can also help you avoid serious consequences, such as paying for a fine or seizure of the products.
Breaking Down the Customs Fees
Once the products enter the US border, the US Customs and Border Protection (CBP) will inspect the package to check if it contains illegal or dangerous items. Upon clearance, it will be determined whether the package is duty-free (less than $800 in value), informal entry ($800–$2,500 in value) or formal/commercial entry (more than $2,500 in value).
With that said, the following factors affect your shipping from Canada to US customs fee:
1. Country of Origin
All products imported to the United States are subject to duties and tariffs unless the country of origin has an active trade agreement with the United States. Packages coming from Canada (and Mexico) are under NAFTA, meaning imported products are free from tariff unless the products in question are agricultural goods (dairy, poultry, egg and sugar, specifically).
In addition, aluminum and aluminum-containing products are also exempted from NAFTA. A 10% tariff will be charged on aluminum products from Canada, including sports equipment, kitchenware, gadgets and furniture.
2. Cost of the Package
As mentioned earlier, a Merchandise Processing Fee (MPF) will be charged depending on the package's cost, regardless of whether it's duty-free, formal or informal. The MPF is computed by getting 0.3464% of the package's monetary value (with a minimum of $26.79 and a maximum of $528.33).
In addition to the MPF, the following fees will also be added:
For formal entries (packages worth more than $2500)
- $3.27 manual entry surcharge
For informal entries (packages worth $800-$2500)
- $2.41 if the entry is automated (not prepared by US CBP)
- $6.43 if the entry is manual (not prepared by US CBP)
- $9.64 if the entry is prepared by the US CBP, regardless of whether the entry is manual or automated
3. Mode of Entry
A Harbor Maintenance Fee (HMF) is charged if the package enters the US border through ocean freight. It is computed by getting 0.125% of the ad valorem of the products.
Unlike the MPF, there is no minimum or maximum rate for the HMF. Couriers avoid paying for this fee by docking the vessel in the Canadian port nearest the US border and then transporting the packages to the United States via land transport.
4. Type of Material (For Agricultural Products)
Some agricultural products (specifically beef, pork, honey, cotton, potato, mushroom and watermelon) are subject to an equivalent customs entry fee. However, the cost will depend on its Harmonized Tariff Schedule number.
Customs clearance can be a complicated process, especially if the package qualifies for formal entry. While business owners can go ahead and religiously study how duties and taxes work, it can be technical and time-consuming to do so.
Fortunately, a reliable courier service provider can take it from there. As industry experts, your partner courier can prepare documents and compute fees for you, saving you the hassle.
If you have questions about how long Canada standard shipping takes or how much shipping from Canada to the US is, Stallion Express is ready to help. Contact us today for a free consultation.