Customs, Duties & Importer-of-Record (the boring bits that matter)

10 min · text · Advanced

Goods entering the US, UK, or EU all go through customs. Customs charges duties (a tax on imports based on product category and country of origin) plus VAT/GST in destination country. AU operators selling internationally need to handle this — either by absorbing the cost (Delivered Duty Paid) or making customers pay (Delivered Duty Unpaid). Most AU operators get this wrong on their first international shipment. Today: customs, duties, importer-of-record, and the structural decisions.

What customs and duties actually are

Three components hit international shipments:

Import duties. Tax based on product category (HS code) and country of origin. Typically 0-25% of declared value depending on product. Determined by the destination country's tariff schedule.

Sales tax / VAT / GST equivalent. Destination country's consumption tax (US sales tax 6-9%, UK VAT 20%, EU VAT 17-25%, AU GST 10%).

Customs broker fees. Service fees for handling customs clearance. Typically A 5-50 per shipment.

For US imports under US$800 ("de minimis" threshold), no duty is owed and customs clearance is simplified. For UK/EU imports under specific thresholds, similar simplifications apply.

Most AU dropshipping shipments are individual orders below de minimis thresholds. So duties are usually not the main concern — VAT/sales tax is.

DDP vs DDU

Two ways to handle international shipments:

DDP (Delivered Duty Paid). You absorb all duties, taxes, and customs fees. Customer receives product with no surprise charges. Better customer experience.

DDU (Delivered Duty Unpaid). Customer is responsible for paying duties and taxes upon delivery. Customer might receive a surprise bill of A 0-50 in customs charges. Worse customer experience.

For AU dropshippers building brand: DDP is mandatory. The "surprise customs bill" experience destroys trust and triggers chargebacks.

For AU dropshippers running pure performance/transactional: DDU is acceptable but bad for reviews.

How to actually handle DDP

Three operational approaches:

Approach A: Bulk inventory in destination market (recommended). Ship inventory from China/AU to local 3PL (US, UK). Duties paid once at bulk-shipping time, baked into inventory cost. Domestic shipping from local 3PL has no further customs.

This is the approach Module 18 covered. International 3PL eliminates per-order customs by handling it once at inventory transfer.

Approach B: Use a fulfilment service that handles DDP per shipment. Some carriers (FedEx, UPS) offer DDP service. Cost: A 0-20 per shipment plus customs duties. Operationally simpler than bulk inventory but more expensive at scale.

Approach C: AU 3PL with DDP shipping. Some AU carriers offer DDP international shipping. Cost included in shipping rate. Simple but expensive (per-order customs costs add up).

For most AU dropshippers reaching A 5k+/month per international market, Approach A (local 3PL) is the right answer. Approaches B and C work for smaller volumes.

Importer-of-record

Customs requires an "importer-of-record" — the legal entity responsible for the goods entering the country.

For US imports:

AU business can be importer-of-record but must register with US Customs (CBP)
Alternative: hire a US-based customs broker who acts as importer
Most AU brands use a customs broker; cost A$300-1,500/year

For UK imports:

AU business needs UK fiscal representative for VAT (Module 9.7)
Same fiscal representative often handles importer-of-record duties
Cost: included in fiscal-rep fees

For EU imports:

More complex; EU has its own importer-of-record requirements
Most AU brands use a UK fiscal representative who handles UK + EU
Or use specialist EU customs brokers

This is operationally complex. Most AU dropshippers below A