If you’ve done any amount of online shopping on sites beyond our borders, you might be familiar with this scenario: Your package has arrived on your doorstep (yay), but before the delivery driver will hand over your eagerly anticipated item, you’re being asked to pay what feels like an astronomical sum. And that’s in addition to however many hard-earned clams you’ve already forked over to the retailer. You, my friend, have just been Duties-and-Taxed.
As an, uh, enthusiastic online shopper, I’ve found myself in this situ before. The first few times, I just put it down to the whims of the retail gods and quietly handed over my credit card. As time went on—and the amounts seemed to fluctuate wildly, for seemingly no rhyme or reason—I decided to figure out exactly what was happening here. Why did I sometimes pay nothing at all? Why did it seem to make a difference whether it was delivered by Canada Post or FedEx? And what the actual heck was “a brokerage fee”?
Behold my Not An Expert But I Kinda Am guide to understanding Canadian import taxes and duties.
What are taxes and duties?
Good question! Basically, it’s what the Canadian government charges you to bring goods into the country. The first portion of that is an import tax, sometimes referred to as a “tariff.” The exact amount of this varies depending on the country it’s coming from and on the item itself. (Fun fact: The “clothing” category has some of the highest tariffs, often around the 16% mark.) Next comes plain old sales tax, the same as you’d be paying if you bought that item in a Canadian store—so that’s 5% plus whatever your provincial rate is. In Ontario, for example, that adds up to an HST of 13%. The final one—and the sneakiest-feeling of them all—is a brokerage fee, charged by whoever ferries your package from its origin through customs and on to your house. These vary from courier to courier. I, for example, recently paid $11 to UPS and $15 to DHL. And, yes, Canada Post charges too. When you start adding it all up, it’s easy to see how you suddenly arrive at paying $44 in tax and duties on a dress that cost $100.
Sometimes I haven’t had to pay customs and duties—why is that?
The most obvious reason is that what you’ve ordered is shipping from within Canada, so there’s no need for an import charge. (Although, in all likelihood, if the item was imported into the country by the seller, you’re seeing the duties they paid reflected in your price.) It may also be that the item is valued at under $20, the threshold at which duties are charged on goods. Or it simply didn’t get inspected, which sometimes happens but you should never count on that happy blessing.
How can I avoid paying customs and duties?
The short answer is: You can’t. Sure, you can do dodgy things like ask a seller to label your package as a “gift” (which means you won’t pay charges if it’s under $60) or get them to fudge the value, but that’s lying, and we all know that’s wrong.
OK, fine. Are there any strategies to reduce the amount of customs and duties I have to pay?
Yes! And they’re all perfectly above board. Nerd alert: We’re about to get deep into the world of trade treaties. Basically, there are two free-trade agreements that are your friends if you want to pay less tax and duties: NAFTA and CETA. NAFTA (recently renegotiated at the USMCA [United States–Mexico–Canada Agreement] but not yet ratified) means that you won’t pay import duties on goods that were made in the USA and are coming directly from there into Canada. Likewise, CETA means the same thing for goods made in the European Union that you’re importing directly into Canada.
Give me an example of this, please.
Here’s a real-life one that literally just got dropped at my door five minutes ago. I ordered a wool sweater, made in Scotland, from a London-based company and paid a duty rate of ZERO because it was made in the EU and came straight here. I did, however, pay $33.99 for that HST-plus-brokerage-fee combo we chatted about earlier.
So, what you’re saying is I should never have to pay duties on stuff I order from America and the EU?
No, and this distinction is important. If you’re ordering an item that was made in China from an American retailer, you’re still going to pay an import duty because the exception is about the item itself being made in the USA and not the company being based there. That’s why I’m strategic about which sites I order from. Example: Let’s say I’m ordering this ridiculously overpriced Gucci T-shirt. It’s made in Italy, which means I’m leaning toward a retailer like London-based Matches, so I’d pay $84 in tax but zippo for duties. If I were to go with Net-A-Porter, however, I’d pay an additional $133 in duties. Also, they’re currently sold out of my size, so….