The Differences Between a Tariff and a Tax When It Involves International Shipping

Companies in the import/export business who use internationally shipping to move their products and services have had to learn the difference between a tax and a tariff. Although the terms have been used interchangeably, they are different and have a distinct impact on the final cost of the product or service being imported. Before you ship anything internationally, it’s important to understand what taxes and/or tariffs may apply to your product or service.

Taxes

A tax is also referred to as an import “duty”. A duty is collected on goods and services as they are brought into the country. Almost every item sold internationally is taxed in some way, shape or form. The tax is based on the value of the item or service that is either coming into or going out of the country. The United States places a Custom’s tax on items that are brought into the country from tourists who have purchased them in other areas of the world.

Tariffs

Tariffs are placed on certain types of items. They are often placed on items that are already produced within the country they are being shipped to. A tariff increases the price of the product, making it more economically in-line with products already being produced locally. Tariffs are well-known for their ability to restrict trade and allows countries to keep their money within their own borders. This keeps costs down and encourages their own economy to be more productive.

If you do business internationally, make sure you know what tariffs or taxes apply to your particular product. This will keep you from experiencing delays as your products work their way through the import/export process. It’s also important to take these fees into account when you set the final price for your product.