Tax & Duty Calculator vs. Guaranteed Landed Cost – Why it matters in Shipping International
September 1, 2020
Here at FlavorCloud we receive a lot of requests from merchants when looking for an international shipping solution, for a tax and duty calculator. They may have read about other services offering such a calculator and believe that is the answer for their cross-border needs. While a tax and duty calculator can be helpful, for a merchant looking to ship globally it is only a small part of the solution and can leave them exposed to surprise fees and charges.
First, we need to understand what Landed Cost is. In simplest terms, Landed Cost is the total charge associated with getting a shipment to its destination. Unfortunately, there is a great deal that goes into that total charge:
- Brokerage Fees
- Currency Conversion
- Regulatory Fees
- Handling Fees
- Country & commodity specific clearance fees
- Advancement fees
- Electronic processing fees
This does not even take into account the cost of time needed to complete customs documentation for each shipment and product classification of HS Codes. As you can see duties and taxes are only a component of the costs. This can cause merchants to underestimate international shipping costs leaving unwelcome surprises for either the merchant or the customer. Surprise fees lead to abandoned shipments, unhappy customers, angry accountants and an overall terrible experience.
With a guaranteed Landed Cost at checkout and DDP Shipping , which is what we at FlavorCloud offer, there are no surprise fees. The amount the customer pays at checkout is the final amount, no reconciliations and no surcharges ever.
As a merchant you may be thinking, well I have seen others offer DDP shipping, how does that differ from FlavorCloud DDP and Landed Cost guarantee?
Some providers who offer DDP shipping, will use a duty and tax calculator to estimate the fees detailed above and do one of two things:
- Add a margin of error to their estimate, usually 20-30% to the duties and taxes presented at checkout for a higher overall cost. So, if their estimate is $50 for duties and taxes, it would be presented as $65 to customer
- Present the estimated amount at checkout $50, for a customer to pay and then charge the merchant later when the actual amount is paid.
As a merchant these two options are awful and present a lose-lose scenario.
You may be thinking who cares about a few extra dollars here and there, but there are additional costs.
The number one reason customers abandon cart at checkout for international orders is high shipping, duties and taxes presented in the cart. Adding an additional 30% will hurt conversion rates and have a negative impact on your sales.
The same can be said about surprise fees months later when the carrier or provider comes back with the actual costs for duties and taxes and your profitable international sales have now put you in the red.
With FlavorCloud, we can solve the issues above with our guaranteed landed cost solution. Enable DDP shipping, with incredibly low shipping rates, accurate duties and taxes, customs documentation and peace of mind that the amount collected at checkout is the correct and final amount.
Reach out to us to learn more about our International Shipping solution that makes cross-border e-commerce easy, affordable and friction free