Shipping from Canada to the US: Customs duty, Taxes, and Exemptions

If you run an online retail store in Canada and need to ship orders to your customers in the US, then paying customs duties and taxes is a part of it. For example, if you have to ship a package containing clothing items valued at $200, you may have to pay another $50 or more as customs duties. 

According to the United States Customs and Border Protection, clothing, jewelry, electronic equipment, and vehicles are not duty-free items. Although you may not be able to avoid customs duty completely, you can do some research to learn about the duties and taxes on certain items. 

Remember that when shipping an order from Canada to the US, you need to pick a category that best describes the products, which will automatically determine the customs duty amount.

In this post, besides explaining customs duty and taxes for shipping items from Canada to the US, we will also tell you how to minimize those charges and create a great shipping experience for your customers. 

Shipping from Canada to the US – Customs Duty 

When you ship items from Canada to the US, the Customs and Border Protection (CBP) service will oversee the process to prevent illegal and potentially risky items from entering the US.   

You are required to pay customs duty and tax on the items you want to ship items across the US border. There are exemptions on certain items from specific countries due to various international trade agreements. 

A customs entry can be a Section 321 entry, a formal or an informal entry:

• Section 321: Items with a valuation of $800 or less are generally duty-free and fall under the Section 321 entry.
• Commercial or Formal Entry: Commercial or formal entries are shipments with a valuation of more than $2,500.
• Informal Entry: Generally, informal entries have valuations of more than $800 but less than $2,500.

According to the CBP, all formal shipments from Canada to the US should have the following:

• An Importer ID Number: It is either your social security number or IRS business registration number.

• Bill of Lading (BOL): A Bill of Lading is a requirement when picking up a shipment and your freight company provides it.

• A Commercial Invoice: A Commercial Invoice outlines a description of the shipped item (s), including their estimated value. You need to send a copy of the invoice with the BOL and one with the US-bound freight.

• An Import/Export License: Special import or export license might be required if your shipped item is regulated.

• The USMCA Certificate of Origin: Countries such as Canada, the US, and Mexico use the USMCA Certificate of Origin. It certifies that a shipment is eligible for the preferential tariff treatment agreed between the USMCA. 

Informal entries usually require a commercial invoice only. However, a USMCA Certificate of Origin can make the shipment seamless. 

Besides getting the CBP clearance, you might also have to obtain the approval of the following government agencies: 

• The Food and Drug Administration (FDA): When shipping food products to the US, you must register with the FDA and get a “Prior Notice” authorization number or PN number. You need to include the PN number on the invoice with a copy of the FDA confirmation.

• The Fish and Wildlife Service: According to the Fish and Wildlife Service, all individuals and companies should obtain an import/export license before importing or exporting fish and wildlife for commercial purposes. 

• The Environmental Protection Agency (EPA): The EPA regulations are about importing/exporting pesticides, devices, chemicals, engines, fuels, ozone-depleting substances, vehicles, wastes, and more.

• The Department of Transportation (DOT): The DOT mandates the classification of all hazardous materials or substances according to the Hazardous Materials Table containing the basic descriptions of the material. According to this classification, importers and exporters must comply with other mandates for marks, packaging, and shipping paper. 

Paying the US Import Duty and Import Tax

Let’s assume you need to ship a bunch of garden umbrellas to a customer from Canada to the US. The cost of the items is $20,000.

To figure out how much import duty and import tax your customer has to pay, you can check the commodity code for umbrellas and let your customer know the import duty rate for that shipment, which is 6.5 percent.

An import tax will be payable on the cost of the umbrellas without shipping, which is $20,000. Now, 6.5% of $20,000 is $1,300. The customer will have to pay a total of $21,300 as customs duty.

If your customer is required to pay import duty on a shipment from Canada, US customs will let the person or the courier know. They’ll tell your customer the payable amount and when it’s due.

Key Considerations for Trading and Shipping between Canada and the US

Currently, Canada is the second-largest trading partner of the United States. One of the key differences in shipping from Canada to the US is the vast size of both countries and the required compliance with several shipping regulations. 

Area-wise, Canada is the second-largest country in the world. Although a part of Canada’s population and businesses live and operate in urban areas close to the US border, many residents and businesses are still dispersed throughout the country. 

Conversely, the US is the third-largest country in the world in both land and area. Due to the geographical vastness of both countries, some shipments sent from Canada to the US may not be easy to deliver. 

In today’s competitive eCommerce marketplace, customer expectations for fast and free shipping have significantly increased. However, shipments from Canada to the US covering a huge distance can often be costly due to applicable customs duties and taxes.  For this reason, you should collaborate with a carrier with experience in shipping items from Canada to the US smoothly. 

Besides a Bill of Lading, a Commercial Invoice and Import/Export Licenses will require. A CCI must list the date of the shipment, name, address, and telephone number of both the shipper and the consignee, a detailed description of the shipped item (s) and the total estimated value of the shipment.

Because maintaining a Canadian inventory as a US supplier can be costly to your business’s financial bottom line, it is possible for US shippers to file the necessary paperwork and application to become (NRI). 

If a US-based company becomes a Non-Resident Importer or NRI, the exporting process from Canada gets easier. The NRI can assume the responsibility for all duties, taxes, and fees payable to the US. 

Many Canada-based businesses require their US partners to function as NRIs to deal with the complex customs duties and fees at the US border. 

Things You Should Know Before Shipping from Canada to the US

Cross-border shipments between Canada and the US require proper planning. Here are a few tips to help you have a hassle-free shipping process:

Do in-depth research: Make sure to make the most of all the free resources available. Both Canada and the US trade embassies provide easy online access to and border clearance requirements.

Take a few days as a buffer for transit time: During the freezing winter season, send your shipment at least a few days early, anticipating delays due to harsh weather conditions. 

Keep the paperwork up-to-date: Incomplete or missing documentation is one of the common causes of clearance delays at the border. Make sure to complete all the paperwork and consult a broker if required.

Buy insurance: If you are likely to ship high-value or fragile items from Canada to the US, consider buying insurance and cover the item cost.

Maintain records: Remember to maintain all the records of your exports for a minimum of six years following the export date.

Use a reliable logistics service: Partner with a reputable and reliable shipping carrier with experience in cross-border shipments between Canada and the US. 

An experienced logistics company with detailed knowledge of customs duty and taxes will help streamline the shipping process and give you peace of mind.

Conclusion

Cross-border shipping between Canada and the United States can be a complicated process. But it does not have to be.

To get the best shipping rate when shipping from Canada to the US, check out ShippingChimp’s US shipping prices.