How do you handle customs declarations for international shipping?
I'm wondering how I should fill out the customs forms for my international backers. Are rewards considered "merchandise", or a "gift", or "other"? Do I put the full value of the reward, or just what it cost to produce each reward?
I'd like to follow the law, but am honestly unsure of how to consider kickstarter rewards, as even my local business bureau has said they don't consider these transactions to be sales. Of course I'd also like to minimize how much backers have to pay in duties, but only by what is legally acceptable, and I'd prefer that I fill out these forms correctly so that they aren't sitting in customs. Any advice is appreciated!
A great question!
Here's the facts: Your backer rewards are absolutely Merchandise. They are not gifts, and no government in the world will see them as such. Period. : O
Can you mark it "gift" and get away with it? Probably, but it is international tax evasion. If you get caught... you're gonna find yourself in a lot of trouble. : / Simply not worth it.
Anecdote: We sent out rewards all over the world. We sent all items to the EU with properly declared customs forms as merchandise and the actual values of the products. Many of them came back to us anyway because the customs agent (as every one is different) couldn't find a packing slip with item-by-item value declaration on it, and he wanted to be 100% certain to milk the person of every penny ..err euro. - And that was on properly declared items.
So yes: Merchandise. And yes, you should mark it the full value (of the pledge level). If you included shipping in the pledge value you can reduce the declared value of the package by the amount of included shipping. When they are charged VAT it will be on the value of the package + the cost of shipping. This new total will roughly reflect the actual pledge amount, and thus they will charged the correct amount of VAT without being charged on shipping twice.
Suggestion: Use E-declarations by using an online service like USPS.com, Stamps.com, or paypal.com/shipnow. - Filling out paper forms by hand is murder; the e-declaration is really really easy as it imports data from previously filled out fields, then asks simple questions like: Merchandise or Gift? ; )
Always open to private or specific help as well,
Hi Nancy, since our first Kickstarter 2012 governments have started taking a lot more notice. EU made a decision 2015 that crowdfunded products are not gifts, they are merchandise that should be taxed as such. Swedish taxation government follows this. That said I think smaller arts oriented projects can get away with gifts, but if you are doing something that is closer to "normal" commerce like electronics your are likely to get called out by customs. We have used 3rd party warehouse service Shipwire (now owned by Ingram Micro) for our logistics. Based in Sweden, we needed to get a UK tax number to get things into the warehouse there and US subsidiary company to import thing into US warehouses. But once all that was done things where easier because they automate a lot of the paperwork. We declare the cost of the products closer to our landed cost including some overhead. This is the same cost we have insurance on so that we cover cost (not profit) if products are lost.
FedEx FIMS service can help-
Here's a shipping service with some great benefits: It's called FIMS 'FedEx International Mail Service'
It's a FedEx air shipping service. It delivers packages to local post offices from a FedEx aircraft, which the P.O. then delivers locally.
Cheap, with an added bonus it minimizes duty and custom fees on overseas deliveries.
How cheap? Here's one seller's experience shipping his product via FIMS:
USPS - $13.75 FIMS - $ 4.00
Theoretically I always felt like the rewards should be a gift, since they are "rewards" aka a present for the support people gave you. It also makes sense since people could theoretically back a 20$ reward with a 200.000$ pledge. Of course this is more wishful thinking than actual knowledge since I wouldn't have to pay tax on top of what I already backed, but as I said in the beginning, declaring it as a present would make sense to me…
It'd be nice if somebody who knew more about international shipping laws could answear this question.
Whatever you do however, you should make sure to put the declaration on the OUTSIDE of the package! Otherwise the package might get stuck in custom. In Germany for example they keep the package in custom, but they refuse to open it for you and take a look at the content if the declaration isn't on the outside, which can be extremely annoying.
In the interest of time, I decided to declare the rewards as merchandise, with the value being the price of the reward as stated on kickstarter. I figured any amount a backer contributes beyond that out of generosity, can be considered the "gift" portion, which I did not declare on the customs form (i.e, if a backer gives $2,000 for a $10 reward, I just stated the value as $10.)
I was hesitant to declare this as a gift, because the spirit of this transaction is that backers gave funds in exchange for an item. A gift would be more appropriate if I had non-transactional, outside relationship with this person, and no money had exchanged hands, or if they just backed me, but didn't ask for a reward, and I decided to send them a token of appreciation. For all intensive purposes, I figured that this is also how the customs agent would view this transaction, and as I have multiple shipments going to the same country, wrapped up and packaged like something purchased in a store, I didn't want to receive any red flags by sending "gifts" out to multiple backers! It might be different for other, not-so-tangible projects.
In all, I felt pretty comfortable with how I decided to handle this, and I'm hoping that the customs agents feel the same! At the end of the day, I figured it's probably not worth filling out the customs form in a way that will make you nervous. Plenty of other things to be nervous about!! ;)
I do appreciate that I don't want backers to have to pay any extra in duties than is required, or to be blind sighted, and since I didn't realize that there were duties until after I started looking into international shipping, I'd recommend adding a line to the effect of "International backers are responsible for paying customs fees" on the rewards page if I ever launch another campaign.
I did find some further reading that made me want to take this route, if you're interested:
WTO on customs valuation: https://www.wto.org/english/tratop_e/cusval_e/cusval_info_e.htm
And some pretty scary language:
Any person who knowingly submits false or misleading export information through the Shippers Export Declaration (SED) (or any successor document) shall be subject to a fine not to exceed $10,000 per violation or imprisonment for not more than 5 years, or both. Source: U.S. Code: Title 13 : Section 305 http://digbig.com/4fqcw.
The sender's failure to complete the form properly can delay delivery of the item or inconvenience the sender and addressee. Moreover, a false, misleading, or incomplete declaration can result in the seizure or return of the item and/or in criminal or civil penalties. https://www.wto.org/english/docs_e/legal_e/ursum_e.htm#gAgreement
This is a really hard one to answer as I think there are still so many blurred things about it.
I would agree with John that yes your rewards are merchandise. So you need to make sure everything is properly declared.
If you have rewards that are small, fit in standard envelopes, you will likely not have any problem at custom. I once had to send 3000 bookmarks to backers and they all received them without a problem because the bookmarks fitted in a standard envelope. I'm sure it will be the same when you send a postcard, badge or even a t-shirt.
If you are sending a product in pallets to a country, then you definitely have to declare everything. I'm still struggling with this. Each product is different and you need to find in which category it belongs to so that it can be properly declared. I have heard that some types of products have 0% custom rate.
I am based in the UK and am looking at these websites at the moment:
Have any of you been contacted by backers that had to pay additional customs fees when they received their reward in the mail? How'd you navigate these conversations? Any tips for avoiding this altogether or suggestions on how to make this less painful for backers?
I kinda think it depends:
"If the reward is diminutive compared to the amount given, such as a gesture of gratitude, then no transaction has taken place. For example if a funder were to donate $50 and they were to receive a mug or a calendar as a thank you, this would not count as a transaction but rather a gift"
Also, it's not a sale - the backer isn't buying merchandise. S/he's contributing to a product development endeavor for which the project leader sends a token of appreciation.
Clear as mud, right?! :)
In light of a legitimate concern for time, I chose to proclaim the prizes as stock, with the esteem being the cost of the reward as expressed on kickstarter. I figured any sum a supporter contributes past that out of liberality, can be considered the "blessing" divide, which I didn't announce on the traditions shape (i.e, if a patron gives $2,000 for a $10 remunerate, I simply expressed the incentive as $10.)
I was reluctant to proclaim this as a blessing, on the grounds that the soul of this exchange is that sponsor gave assets in return for a thing. A blessing would be increasingly fitting on the off chance that I had non-value-based, outside association with this individual, and no cash had traded hands, or on the off chance that they simply supported me, yet didn't request a reward, and I chose to send them a token of appreciation. For every single escalated reason, I assumed this is likewise how the traditions operator would see this exchange, and as I have numerous shipments heading off to a similar nation, smadav 2020 wrapped up and bundled like something obtained in a store, I would not like to get any warnings by sending "endowments" out to different sponsor! It may be distinctive for other, not really unmistakable ventures.
On the whole, I felt quite OK with how I chose to deal with this, and I'm trusting that the traditions specialists feel the equivalent! By the day's end, smadav 2019 I figured it's likely not worth rounding out the traditions frame such that will make you anxious. A lot of different things to be anxious about!! ;)
How do you handle customs declarations for international shipping?
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