What is the De Minimis threshold?

It is the value below which goods can enter a country tax-free. For example, the US threshold is $800, meaning packages under $800 usually pay no duties. The EU has effectively removed this threshold, taxing almost everything.

Should I ship DDP or DDU?

For e-commerce, always ship DDP (Delivered Duty Paid). If you ship DDU (Unpaid), the customer will be asked to pay extra fees at the door, which leads to a massive rate of refused packages and negative reviews.

Harmonized Tariff Schedule (HTS) codes are 6-10 digit numbers that classify your product for customs. Using the wrong code can lead to overpaying duties or having your shipment seized.

Cross-Border Selling Guide 2025: VAT, Duties & Hidden Fees

Expanding internationally is the dream. You instantly unlock billions of new customers in Europe, Asia, and the Americas. But it comes with a hidden danger: Landed Cost.

Many sellers start shipping globally only to realize they are losing money on every order due to hidden VAT, surprise customs duties, and predatory currency conversion rates.

Even worse, if you don't set up your taxes correctly, your customer might be asked to pay an extra $20 at their doorstep. They will refuse the package, leave you a 1-star review, and you will be stuck paying for the return shipping.

In this guide, we will break down the complex world of cross-border fees so you can profit globally in 2025.

1. The "De Minimis" Threshold Explained

This is the most important concept in international shipping. "De Minimis" is the value below which a government will not charge duties or taxes on an imported shipment.

If you sell a $50 shirt:

To the USA: It enters tax-free (Threshold is $800).
To Canada: It gets taxed (Threshold is roughly $15 USD / $20 CAD).
To Europe: It gets taxed (Threshold is effectively €0).

2025 Update: The European Union has removed the €150 duty exemption for many goods. This means almost EVERY package entering the EU is now subject to VAT and potentially duties. You cannot fly "under the radar" anymore.

2. DDP vs. DDU: Who Pays the Bill?

When you ship a package, you must choose Incoterms (International Commercial Terms). For e-commerce, it boils down to two choices:

DDU (Delivered Duty Unpaid)

You ship the item. When it arrives in the customer's country, Customs holds it. They contact the customer and say "Pay us $25 in taxes to release your package."

Pro: You don't deal with tax math.
Con: Customers hate this. 30-40% of DDU packages are refused and returned. You lose the sale and shipping cost.

DDP (Delivered Duty Paid)

You calculate the tax at checkout, collect it from the customer, and pay the carrier (DHL/FedEx) to handle customs. The package arrives at the customer's door with no extra fees.

Pro: Seamless customer experience. Higher conversion.
Con: You must calculate the tax correctly. If you undercharge, you pay the difference.

Verdict: Always use DDP for e-commerce.

3. The Hidden Killer: Currency Conversion

If you are a US seller selling in the UK, you get paid in British Pounds (GBP). But your bank account is in USD.

Amazon, PayPal, and Shopify will convert that money for you. But they don't give you the "Real" exchange rate (the Mid-Market rate). They charge a "spread."

Typically, they take a 3% to 4% fee on every transfer. On $100,000 of sales, that is $4,000 of pure profit gone.

The Fix: Multi-Currency Accounts

Open an account with a service like Wise (formerly TransferWise), Payoneer, or Airwallex.

These services give you a local bank account in the UK, Europe, and Japan. You can receive GBP directly into your UK account with 0% fees. Then, you can convert it to USD later at a much better rate (usually 0.5%).

4. VAT and IOSS (Selling to Europe)

If you sell to the EU, you need to understand the Import One-Stop Shop (IOSS).

Before IOSS: You had to register for VAT in every single country you sold to (France, Germany, Italy, etc.). A nightmare.
With IOSS: You register once. You collect VAT at checkout for all EU customers. You file one monthly return for the whole EU.

Requirement: You usually need a "Fiscal Representative" (an EU intermediary) to register for IOSS if you are not based in the EU.

5. HTS Codes: The Language of Customs

Every product has a "Harmonized Tariff Schedule" (HTS) code. It's a 6-10 digit number that tells customs what the item is.

Cotton T-Shirt: 6109.10
Polyester T-Shirt: 6109.90

The duty rate depends on this code. A cotton shirt might have 16% duty, while polyester has 32%.

Tip: Use a tool like SimplyDuty or the official government lookups to find your code. Do not guess. If you declare "Clothing" instead of the specific code, customs will likely charge you the highest possible rate.

FAQ

Does "Free Shipping" include duties?

No. "Free Shipping" just means you pay the courier. It does not mean you pay the government. You must explicitly state "Taxes and Duties Included" if you are covering them.

What if I undervalue the package?

Some sellers mark a $100 item as $10 to avoid taxes. Do not do this. Customs agents have X-ray scanners and databases of product values. If caught, you will be blacklisted, fined, and your goods will be seized.

Is it worth selling internationally?

Yes, but focus on high-margin markets first. Start with Canada (if you are in the US) or the UK. Don't try to open 50 countries at once. Master the logistics of one lane before opening another.

Conclusion

Global selling is a math problem.

To be profitable, you must calculate the Total Landed Cost:

Manufacturing Cost + Shipping + Insurance + Duties + VAT + Carrier Fees + Currency Fees

If your margin can support that stack of costs, the world is your oyster. If not, stick to domestic sales until you can lower your COGS.

The "Global Selling" Guide: Understanding Cross-Border Fees in 2025