Taxes, Duties & Brokerage Fees: What are U.S. sites hiding?

Comments (9) Featured, Guides, Industry News

You always appreciate a great deal, right? And often enough the great deal is available online, cross-border.

But, remember... there are 2 sure ways to get a nasty surprise when shopping online. The first is to spend your money on a shady website, and the second is to get your bill spiked with taxes, duties and brokerage fees.

You probably already know how to avoid fraud when buying auto parts onlineBut what about hidden fees?

The majority of American sites don’t discuss the details of these elusive charges because, honestly, they don’t need to. And it’s bad for business.

Duties, taxes, and brokerage fees can come out to an additional 100%+ of the original charge. Ouch!

So if you want to avoid a shopping horror story, ask yourself… What is the real cost of checking out your cart cross-border?

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...Plus Shipping & Handling

If you live north of the 49th parallel but want to shop in the States, you can forget about free shipping.

Your shipping chargers will be based on the number of items you buy, their weight and dimensions, as well as the shipping distance and shipping method. Yes, it’s kind of complicated. So read the fine print carefully.

Most websites offer a shipping estimate before check-out. But it’s only that - an estimate. You need to factor in the currency exchange rate for the price of your merchandise, as well as for the shipping charges.

Don’t gloat if the exchange rate is in your favour. Credit card companies will use an inflated rate instead of the market rate. And they will charge an additional fee for the automatic currency conversion made during payment.

Keep this in mind: opting for the cheapest delivery method to save a few bucks may cost you.

UPS and FedEx standard shipping will be subject to the most brokerage fees once your package gets to the border. FedEx Priority or UPS Expedited might make more sense.

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Brokerage Fees

Once your package gets to the border, special employees hired by your courier company will fill out all the paperwork required to get your packaged processed by Canada Customs. The hefty fees for this service, the brokerage fees, will be passed onto you.

A brokerage fee can really catch you by surprise because it’s not administered by the Canadian government. It can run as high as $50 dollars on a $20 item. For larger times it can often go up to $500 or more. Even products that are not subject to any duty or tax can be quoted at $50 or higher.

Brokerage fees vary. So if you’re set on shopping in the States read your courier’s service guide or call their local number for more information on their policies.

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Customs & Duties

The products you’re importing may be subject to customs and duties. The amount of duty depends on the type of item, its value, and its country of origin. Duties are hard to estimate accurately. But if you want to have a go, you can reference the cryptic Canadian Customs Tariff.

Or you can contact the Canadian Border Information Service during business hours and speak to an officer. Be ready to provide exact information on your purchase, including country of origin, manufacturer, composition, intended use, and pricing and payment information.

From my own research, the applicable duty on imported automotive parts is around 14%.

But here is something to smile about:

NAFTA and other trade agreements decree that products manufactured in the U.S., Canada, Mexico, or Chile are subject to lower duty or no duty.

To qualify, your imported goods must be for personal use and must be marked as made in a NAFTA country. If the value of your package is over $1,000 you may be asked to provide a formal statement of NAFTA compliance.

Canada Customs agents may decide to be particular. It’s a good idea to get a written document confirming your product's country of origin. The online store should be willing to provide this for you.

CUSTOMSDUTIES

Canadian Taxes on Imported Goods

Tax is inevitable.

You cannot evade Canadian taxes by shopping online in the States. Every purchase will include additional tax charges. Some sites will charge these taxes directly, but it’s definitely not a set standard. Most times, Canadian taxes will be charged by your courier, once your package is delivered to you.

And they will be calculated on the value of your purchased goods including the applicable customs and duties!

Don’t be tempted to evade your taxes! Some merchants will offer to mark down the dollar value of your purchase, or label it as a gift. This may work in saving you some money, but it’s illegal and considered fraud.

And if fraud doesn't scare you, consider that your courier will insure your parcel up to its declared dollar value. If your packaged is damaged or lost, you will end up holding the short end of the stick.

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So, what’s my official advice?

Save yourself a headache. Shop locally and support your own economy. It’s actually cheaper.

What do you think? Let me know in the comments below!

9 Responses to Taxes, Duties & Brokerage Fees: What are U.S. sites hiding?

  1. frank says:

    There are some items that ,it seems, Canada doesn’t handle ,cant be had in Canada ,but available in the US. But when/before I buy online I check locally and Canada/US suppliers to compare prices and shipping cost.

    • Gordie says:

      This article is very good on explaining what really goes on especially with the Courier Companies. The important thing is to be up front with the Customs Officers @ the Border. Most times if your over they will allow you to come through N/C. As this article says check Canada Businesses 1st then go South if it is not what you want.

  2. John Barnes says:

    I agree with Frank. There are so many items that don`t seem to be available in Canada that are available in the US.If I can wait I usually purchase these items when I am in the US for the winter. I have also bought items from the US and insisted on handling the duty and taxes myself. It is difficult but I have been successful and have avoided brokerage fees. Buy from Canada if you can.

  3. robert wagstaff says:

    Do your homework. The article is correct as far as hidden fees now being added as governments cash in on missed taxes. The reason a lot of U.S. companies refuse to ship to Canada is uneducated Canadians refusing to pay the fees and refusing the package at their door. This makes it too much hassle to deal with Canadians. Add the fact that our dollar is quickly losing value and it makes sense and avoids headaches to now shop in Canada. We should support our country as we are up against strong headwinds these days.

    • Brad says:

      I think you are correct, Robert.

      What many Canadians don’t know is, it is illegal in Canada for a courier (or any other carrier) to hold hostage any goods belonging to the customer if the customer refuses to pay any further fees…even “brokerage” fees…we’ve seen UPS even call it a “bond fee” which doesn’t exist between a carrier and the receiver. If pressed, you have the right to receive your goods and the courier will have to deal with you via a collector for their fees. Even then they may not have a leg to stand on because unless you PREVIOUSLY signed a document giving the courier “power of attorney” to act as your broker, they have illegally cleared your goods into Canada. Couriers have gone to court over this in the past and have lost.

      Also, these couriers will include all the extra fees in all but the cheapest shipping service…check their service rates guide for details. Cheaper might not be cheaper.

      Canada Post clears their own shipments so you will pay no additional fees if the shipper uses USPS (USA Post Office). Of course, you will pay any duties and taxes due but that’s consistent across the board.

      Buy Canadian if you can. I’ve found Canadian online shopping is WAY behind USA but then USA has ten times the population. I’ve only bought from TDOT once so far but plan to use them again. I was very pleased with the service I was given.

  4. Robert says:

    It is not worth buying on US site for the extra cost as stated double in a surprising at the door time. It is unfortunate that almost all auto part site don’t carry the stock I can find in US sites. I can spend hours searching for parts to with outcome. The products are just not available in Canada. It can be easier to just drive to US. To get parts.

  5. James says:

    If one ignores all the fees and tax issues, the first thing one needs to do when buying US product online is to convert the price to CDN dollars. If the US price is significantly lower then the item has passed the first test. Next, only purchase items from the US if the seller uses USPS as their shipping method. If they only use a courier service then it’s a no go. When a seller uses USPS(United States Postal Service) then you avoid brokerage fees. You may however be hit with Canadian sales tax and/or duty depending on the origin of manufacturer. Another option is to set up a parcel service in a city that is close to the Canadian border. These services are available all along the US/Canada border on the US side. When you order online you simply use the parcel service address to ship to. They charge nothing to warehouse your items and only charge a very small fee per package when you come there to pick it up. This option works well as long as you don’t live too far from the border.

  6. Robert says:

    I would prefer to shop in Canada IF retailers here didn’t rip you off so much. Almost everything you buy in Canada is much higher than in the States. The simple way to avoid broker fees, shipping charges etc is to ship to one of the Border Mail places. Most auto parts retailers ship free within the 48States! You simply go down to the border and pick up your shipment, declare it at the border and your off home! As long as youre not bringing back excessive booze or cigs I have yet to pay any duty! I do like TD though, and will continue to shop here if the price is reasonable.

  7. jay says:

    Silly article. Just ship your items to the mail box on Cudaback Avenue in NY 14303, a Google search will provide their info. They charge $3 a parcel and you pay HST when you cross the border. I make a trip once a month and easily save $10k a year by importing my items from the US.

    If Canadian retailers were fair with their pricing, I would have to import my own items.

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