Import Duty vs. VAT: The Ultimate Guide to Shipping Taxes for Amazon Sellers

For international sellers expanding into the U.S. and European markets, logistics is not just about moving boxes—it's about navigating the complex world of tax and customs regulations. A lack of understanding of shipping taxes often leads to unexpected expenses, customs delays, or even shipment rejection at the border.

The biggest confusion usually lies in the difference between the US and European systems:

• USA: Focuses on Import Duty (Tariffs) and has a generous tax-free threshold ($800).
• Europe: Focuses on VAT (Value Added Tax), which applies from the first dollar, requiring strict compliance like IOSS.

In this comprehensive 2026 guide, we break down the difference between duty and tax, provide real calculation examples, and explain how to simplify the process using DDP Shipping.

1. Difference Between Duty and Tax (VAT Explained)

Many beginners use "Duty" and "Tax" interchangeably, but they are different legal concepts.

A. Understanding Import Duty (The "Product" Tax) Import duty is a federal tax levied on the type of product you are importing. It is determined by the HS Code (Harmonized System). Its purpose is often to protect local industries.

Example:

• Cotton T-shirts (HS 6109.10): High duty (~16.5%) to protect US cotton farmers.
• Computer Accessories (HS 8471.60): Often 0% or very low duty to encourage tech growth.

B. Understanding VAT (The "Consumption" Tax) VAT (Value Added Tax) is a consumption tax charged at every stage of the supply chain. It is calculated based on the Total Landed Cost (Product Value + Shipping + Duty).

• In the USA: There is generally no federal VAT on imports. Instead, Sales Tax is collected from the final customer at checkout by Amazon.
• In Europe: VAT is mandatory upon entry (ranging from 19% in Germany to 21% in Spain). You cannot sell on Amazon Europe without a VAT number and EORI number.

Pro Tip: Don't want to deal with HS codes and tax rates? Many sellers choose our DDP (Delivered Duty Paid) service. We pay the Duty and VAT for you, so you get one simple all-inclusive shipping price. [Contact us for a DDP Quote] (Link to Contact).

2. Shipping Taxes to USA: Section 321 & Bonds

Shipping to the USA is unique because of its "De Minimis" value, but recent policy changes have limited exemptions.

The "Section 321" Exemption ($800 Rule) – Updated for 2026: Previously, shipments valued under $800 USD could enter the USA duty-free and tax-free under Section 321 (Type 86 Entry). However, as of May 2025, this exemption is suspended for goods from China and Hong Kong. Broader restrictions apply globally to commercial shipments since August 2025, excluding tariffed items (e.g., under Sections 301, 232, 201). Check current CBP guidelines for eligibility, as full elimination is slated for July 2027.

• Strategy: Due to these changes, splitting large orders into smaller shipments or drop-shipping may no longer avoid duties—consult a customs broker. For reliable compliance, consider our DDP service to handle all fees upfront.

The Customs Bond Requirement If your shipment is valued over $2,500 USD, or contains regulated goods (FDA, FCC), you are legally required to purchase a Customs Bond.

• Single Entry Bond: Costs ~$50 per shipment. Good for one-time importers.
• Continuous Bond: Costs ~$400-$500 per year. Recommended if you ship more than 5 times a year.

Important Compliance Note: In addition to the bond, US importers must also file the ISF Filing at least 24 hours before the cargo is loaded in China. Missing this step can lead to a $5,000 penalty.

3. Shipping to Europe: The VAT & IOSS Challenge

Unlike the USA, Europe does not give you a tax break.Europe has always been strict on taxes, but 2026 brings the biggest overhaul in decades.

The "Zero Threshold" Rule

Since 2021, the EU removed the €22 tax-free exemption. Now, all imports are subject to VAT, regardless of value.However, goods under €150 were previously exempt from customs duty.

However, add a note on 2026 changes: The €150 customs duty exemption ends July 1, 2026, introducing a €3 fixed duty per item for <€150 parcels (interim measure until full elimination in 2028). This doesn't affect VAT but adds costs for low-value shipments.

• The Impact: Parcels valued under €150 will now incur a €3 fixed duty per item (an interim measure until duties are fully standardized in 2028).
• Takeaway: Low-value drop-shipping is becoming more expensive. You must factor this extra €3 cost into your pricing.

What about shipments over €150? You (the seller) must pay Import VAT and Duty at the border. You need your own EORI Number and VAT ID to clear customs.

What is IOSS (Import One-Stop Shop)?

For packages valued under €150, Amazon collects the VAT from the customer at checkout. You simply need to provide Amazon's IOSS Number to your freight forwarder.Update for 2026: IOSS now applies to all imports (no €150 limit), requiring full customs declarations for all.

• How it Works: Amazon collects the VAT from the customer at checkout for all orders. You must provide Amazon's IOSS Number to your freight forwarder for customs declaration.
• Risk: If you forget the IOSS number on the commercial invoice, the customer will be charged VAT again upon delivery (resulting in bad reviews).
• Requirement: Full customs declarations are now mandatory for every single package, increasing the paperwork burden.
• Strategic Advice: With the new €3 fixed duty and mandatory full declarations, "cheap shipping" is dead. We recommend consolidating shipments via Forest Leopard's Air Freight to reduce per-item handling costs.

4. How to Calculate Import Tax (Real Examples)

Calculating your landed cost is vital for profitability. Here is how customs brokers calculate the bill.

The Formula:

Total Tax = (Duty Rate × Customs Value) + (VAT Rate × (Customs Value + Duty + Shipping))

Scenario: Shipping $5,000 of Headphones to Germany

• Product Value: $5,000
• Shipping Cost: $1,000
• Duty Rate: 2% (Assumption)
• VAT Rate: 19% (Germany)

Calculation Steps:

1. Calculate Duty: $5,000 × 2% = $100
2. Calculate VAT Base: $5,000 (Value) + $100 (Duty) + $1,000 (Shipping) = $6,100
3. Calculate VAT: $6,100 × 19% = $1,159
4. Total Tax Bill: $100 + $1,159 = $1,259

Forest Leopard Insight: As you can see, VAT is charged on the shipping cost too! If you calculate this wrong, your profit margin disappears. We recommend asking your forwarder for a "Landed Cost Analysis" before you ship.

5. Common Mistakes to Avoid

Mistake #1: Under-Declaring Value Some sellers try to declare a $5,000 shipment as $500 to save tax.

Consequence: Customs may seize the goods, issue a fine, and blacklist your company. Amazon may also suspend your account for illegal practices.

Mistake #2: Wrong HS Code Classifying a "Smart Watch" as a "Watch" vs. a "Radio Transmitter" changes the duty rate.

Solution: Let Forest Leopard's customs team classify your goods correctly to find the lowest legal duty rate.

Summary: Simplify Your Taxes with DDP

Understanding import duty vs VAT is essential, but you don't have to become a tax accountant to sell globally. The smartest way to handle international taxes is to outsource the complexity.

Why Choose DDP (Delivered Duty Paid)? Instead of hiring a broker, buying a bond, and paying complex tax bills separately, Forest Leopard offers DDP Shipping.

• One Price: We quote you a flat rate per kg (e.g., $1.5/kg) that includes Shipping + Duty + Tax.
• Zero Headache: We handle the customs clearance. Your goods arrive at Amazon FBA as if they were shipped domestically.

Ready to ship without the tax headache? Forest Leopard provides seamless DDP Shipping to the USA and Europe, ensuring your goods clear customs smoothly while you focus on selling.

[Get Your DDP Shipping Quote Now] (Link to Contact)