Cross-Border Tax, Duty, and Brokerage Fees, Demystified

You, or a friend, may have experienced the following online shopping horror story. You order something online (cross-border), from the States, for $100. But when you receive the item, you're presented with a bill for an additional $80! What's going on here? What are all these extra charges? What's the difference between tax, duty, and brokerage fees anyway?

Tax: Everyone Needs to Pay Tax!

Tax is inevitable. Everyone must pay Canadian tax, even when buying online cross-border from the States! Every purchase from a US store will include charges for Canadian GST + PST, or HST, depending on what is applicable for your province. Some stores will charge these taxes up front; most of the time your courier company will present you with a bill upon package delivery.

There is one (legal) way to reduce the amount of tax you pay: purchase the item while you're out of the country, and import it yourself. You'll have to declare the item when you enter the country, and count it towards your personal exemption. At last check, you may import $200 worth of goods tax-free if you've been out of the country 24 hours, up to $800 if you're away 48 hours or more.

Another way to reduce your tax (at the time of purchase) is to order from out of province. You won't pay your provincial sales tax (PST), only the 5% Goods and Services Tax (GST). However, some provinces require you, by law, to report and remit the appropriate amount of provincial sales tax. Note that if you live in an HST province, this does not apply -- you are always charged the full HST, even on out-of-province purchases.

Since Canada Customs calculates the tax from the declared value on the parcel, some unscrupulous merchants can also save you tax if they mark your purchases as "gifts" or lie about the dollar value of your purchase. Although this usually works, it's fraud. Not to mention, any courier insurance only insures the package up to the declared dollar value. You could be left holding the bag if the package is damaged or lost in transit. And would you really want to deal with such a shady merchant?

Duty: Special Tax on Imports

Duty is often misunderstood. Also known as a tariff, it's a special kind of tax that you pay to the Canadian government when you import goods. Duties can be imposed to help protect local industry (making it more difficult for foreign manufacturers to compete with Canadian manufacturers). Duty rates can vary from 0% (duty free) to 20%, depending on the type of goods. Most photographic equipment is duty free, when imported from most countries, including the States. This means you pay no duty! This includes most products such as SLR and point-and-shoot cameras and lenses. For other goods, check out the Canadian Border Services Website. You can also check out our list of Duties on Photography Equipment for a complete list of photography equipment duties.

Want to be extra sure? You can call the Canadian Border Information Service Hotline and ask an agent specifically about the duty on a particular item. The phone number is 1-800-461-9999.

Brokerage Fees: Courier Companies Ripping You Off

So you said photography equipment is duty free. Why I am being hit with a hefty Brokerage Fee, or Custom Fee, when I import my camera? Well, this isn't a fee imposed by the Canadian government, but by your courier company (UPS, FedEx, or USPS/Canada Post). The courier company is charging you for providing customs service: being your agent when "clearing" your parcel across the border. This fee can run $40 or $50 dollars, even when purchasing a $20 item.

Luckily, there are a few ways to avoid expensive brokerage fees. Some merchants, such as B&H Photo Video, offer Purolator Shipping which includes all applicable taxes, duties, and brokerage fees, and they show you the final price that you will pay. Another method is choosing United States Postal Service (USPS) as a shipping option; Canada Post will only charge a $8.50 brokerage fee (payable when you pay any applicable taxes incurred). Other good options are FedEx Priority or UPS Expedited. These shipping options have most brokerage fees included. For UPS, a $10 bond fee applies unless you pre-pay your tax by calling UPS with a credit card number. Avoid UPS/FedEx Standard or Ground. Standard (also known as Ground) shipping plus brokerage fees will cost more than the Priority or Expedited options. Make sure before you buy. Check out UPS' rates for Customs Clearance into Canada. We couldn't find FedEx's fees listed online. We've created a table comparing brokerage fees from common shipping methods.

Warning! UPS charges a brokerage fee of $4.50 per line beyond the first 5 lines on the customs form. Generally this means if you buy more than 5 different items, expect extra brokerage charges.

The End

Well, there you have it: hopefully we've demystified the added charges of tax, duty, and brokerage fees. If you have questions or clarifications, please feel free to contact us. Good luck, and happy photographing!

P.S. When buying from the States we recommend Adorama or B&H Photo Video, two of the biggest and most respected camera stores down south.

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