Duties, taxes, and total landed cost

How customs charges actually add up at the destination

Last reviewed on October 31, 2026.

The shipping label is rarely the whole price. When a parcel crosses a border, the destination may charge import duty, a sales-style tax (VAT or GST), and one or more handling or brokerage fees. Unless the sender prepaid them, the recipient pays, usually before the package is released. Underestimate this and the recipient may refuse delivery; the parcel then ships home or is abandoned, and the sender absorbs the loss.

This page walks through the components, the thresholds that decide whether anything is owed, two worked examples, and the practical steps that minimize surprises. 2026 has changed the rules in the EU and for parcels into the U.S., so older advice on this topic is often wrong.

The four components

1. Import duty

Usually a percentage of the customs value, set by the destination and varying by product. The product is identified by an HS code (Harmonized System code), a standardized international classification. The same item carries different rates in different countries, and origin matters too: the rate depends on where the goods were made, not where they shipped from.

2. VAT, GST, or local consumption tax

Most countries charge a sales-style tax on imports at or near their domestic rate (for example 19% in Germany, 20% in the UK, 10% in Australia, 5% GST in Canada plus provincial tax in some provinces). In most VAT countries the tax is applied to the customs value plus the duty, not to the goods price alone. The worked examples show that arithmetic.

3. Brokerage / customs clearance fee

Private carriers (UPS, FedEx, DHL) charge for clearing the parcel through customs. This goes to the carrier, not the government. Postal services generally charge a smaller flat fee instead: Canada Post has long charged C$9.95 and Royal Mail lists £8 when duty or tax is due. Brokerage on a small courier parcel can exceed the duty owed.

4. Handling / disbursement fee

A fee for advancing the duty and tax to customs on the recipient's behalf. Some carriers fold this into brokerage; others itemize it. Schedules change, so check the carrier's current rate guide rather than a third-party figure.

De minimis thresholds

Many countries set a value below which duty, and sometimes tax, is waived. Duty and tax often have different thresholds, and the trend is sharply downward. These are the rules as we understand them at the review date. Confirm with the destination's customs authority before relying on them:

DestinationDutyVAT / tax
United States$800 exemption suspended for all countries since Aug 29, 2025. Bona fide gifts up to $100 remain exempt.No federal VAT.
European Union€150 relief replaced from July 1, 2026 by a temporary flat €3 per item category on low-value parcels up to €150. Normal tariff rates above €150.VAT from €0, often collected at checkout through IOSS. Person-to-person gifts up to €45 are generally relieved.
United KingdomNone on most goods worth £135 or less; duty above that. Reform has been announced, so check for changes.VAT from £0 on goods. For purchases up to £135 the seller usually charges it. Gifts up to £39 are VAT-free.
CanadaCourier from the U.S. or Mexico under CUSMA: duty-free to C$150, tax-free to C$40. Post and other origins: C$20.
MexicoRules were tightened in 2025 and vary by origin. Shipments from the U.S. and Canada keep separate treatment, with US$50 and under free. See the country guide.
AustraliaNone on most goods up to A$1,000.10% GST is usually collected by the seller or platform at checkout on goods up to A$1,000. Above that, duty and GST are collected at import.
JapanGenerally none where the customs value is ¥10,000 or less, but a change to tax low-value imports has been reported. Check Japan Customs.

The EU changes in 2026

The European Commission says the €3 duty is charged per item category, based on tariff classification: five T-shirts owe €3, while three T-shirts and a watch owe €6. It is reported to run until July 2028. USPS describes it as applying to business-to-consumer packages up to €150 and to consumer gifts above €45 and up to €150, charged for each unique HS code. Trade sources differ on exactly how it applies outside IOSS, and an additional EU handling fee of around €2 was reported for November 2026, which we could not confirm from an official source. France's separate €2 small-parcel tax was reported suspended from July 1, 2026 to avoid overlap. Sellers should check current guidance with their carrier or IOSS intermediary.

How the numbers stack: two worked examples

Example 1: A $250 item by courier

You're sending $250 of a craft good from the U.S. to Germany. Shipping costs $40. The HS code attracts a 4% duty rate; Germany's VAT rate is 19%. Because the value is over €150, the normal rate applies rather than the flat €3.

  1. Customs value: in the EU, goods plus shipping and insurance to the border (CIF basis). $250 + $40 = $290.
  2. Duty: 4% × $290 = $11.60.
  3. VAT base: customs value + duty = $290 + $11.60 = $301.60.
  4. VAT: 19% × $301.60 = $57.30.
  5. Carrier brokerage: varies; budget roughly $15 to $25 unless the carrier publishes otherwise.

Total at delivery: $11.60 + $57.30 + about $20 = roughly $89, on top of the $250 the buyer already paid. By post, the brokerage line is replaced by a smaller flat fee, which is part of why post often wins for low-value cross-border parcels even when transit is longer.

Some countries, including the U.S., Canada and Australia, generally use the value without international freight (FOB-style), so the same parcel would be taxed on less there.

Example 2: A €60 order to Germany

Two T-shirts and a mug sold for €60, with €10 shipping, no IOSS. That is two item categories.

  1. Duty: 2 × €3 = €6.
  2. VAT: 19% × (€60 + €10 + €6) = €14.44.
  3. Total owed: about €20.44, plus any carrier or postal handling fee.

That is over a third of the order value, which is why sellers increasingly build it into checkout.

Who pays, and what to put on the customs form

By default, duties and taxes are billed to the recipient (DAP, Delivered at Place, still often called DDU). The carrier collects before release. DDP (Delivered Duty Paid) means the sender pays. Couriers offer this as a bill-to-shipper option. USPS now offers DDP on its international services to a listed set of countries through Click-N-Ship and retail counters, including an optional cover if customs assesses more than was prepaid. In some cases USPS says opting out may stop you buying postage. Prepaid amounts generally aren't refunded if a parcel is refused.

On the customs form:

  • Declare the actual value of the goods. Underdeclaring is a false declaration that can bring holds, penalties and seizure, and it undermines any insurance claim.
  • Use a precise description ("cotton t-shirt, women's, size M", not "clothing" or "gift").
  • Select gift only for a true person-to-person gift. Abuse of the gift box is routinely caught.

Estimating before you ship

Quick mental model

For most EU destinations, expect 20 to 25% of the customs value as VAT, plus duty, plus brokerage on courier shipments. Under €150, duty is the flat €3 per category. For the UK, similar but with the £135 step. For Canada, the low postal threshold of C$20 means even modest parcels can be charged, while CUSMA-origin courier parcels get a higher allowance.

Calculators

Our duty calculator gives a reference estimate. Carrier landed-cost calculators are more accurate but need the HS code. For a one-off shipment a rule of thumb is usually enough; for an e-commerce business, an HS code per SKU is worth the time.

How to keep duty bills small (legally)

  • Use the right HS code. Categories that look interchangeable (cotton vs. synthetic, leather vs. plastic) can carry different rates. The correct code is the only safe one.
  • Check trade agreements. USMCA/CUSMA removes duty on many qualifying goods between members, but origin rules apply: goods merely shipped from a member country do not qualify. Preferences generally can't be claimed through the new U.S. postal process.
  • Do not split orders to stay under a threshold. Customs authorities can treat split parcels as one shipment, and U.S. rules specifically address splitting to avoid duty.
  • Choose the carrier deliberately. On small parcels, a postal flat fee is usually cheaper than courier brokerage.
  • Use IOSS for EU e-commerce if you're a seller. It collects VAT at checkout on goods up to €150, which avoids a VAT charge at delivery.

Common mistakes

  • Telling the recipient "no duty applies." Better to estimate honestly than reassure inaccurately.
  • Assuming the old EU €150 or U.S. $800 limits still apply. Neither does.
  • Forgetting that VAT is charged on duty. The compound calculation surprises a lot of people.
  • Underdeclaring value. Saves a few dollars, then undermines any claim if the parcel is lost.
  • Marking commercial goods as "gift". Consequences range from delays to fines.

Where to go next