Shipping Tariffs Explained: What Aussie Businesses Need to Know

Tariffs are a critical factor in international shipping, and they're one of the factors to consider when importing or exporting goods. But how much does it affect businesses, and why is it important to understand it?

The US recently imposed a 10% tariff on Australian goods under President Trump's "Reciprocal Tariffs" policy. A 25% tariff was also placed on all steel and aluminium imports to the US, eliminating Australia’s free trade policy with the US on such goods. This was, however, suspended for 90 days by the US Government.

These tariffs have brought concern among Aussie business owners due to its changes. International trade accounts for 44% of the nation's gross domestic product (GDP) and generates one in five jobs. A sudden tax on imports and exports can reduce consumer confidence, which then causes stagnation for companies. 

Understanding tariffs is essential for those involved in international freight. This article aims to demystify tariffs for Australian businesses, providing practical insights so businesses can make informed decisions in the global marketplace.

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What Are Tariffs?

Tariffs are taxes placed on goods that are imported into or exported from a country. Governments use it to raise revenue or protect local industries from foreign competition. It is one of the key costs that businesses need to factor into their pricing and logistics planning.

Tariffs are different from other charges like freight costs, fuel surcharges, and Goods and Services Tax (GST). They apply specifically to the value of goods being moved across borders. For example, an Australian business that imports electronic parts from the US may need to pay a tariff based on the item’s classification and declared value.

Who Pays Tariffs?

One of the most common questions around tariffs is who pays them. The answer depends on the terms of the trade agreement between the buyer and the seller.

These terms are usually defined by Incoterms in international shipping. Incoterms are standard contract rules to know who is responsible for costs, risks, and tasks. For example, under Delivered Duty Paid (DDP), the seller is responsible for paying tariffs and delivering the goods to the buyer’s location. In contrast, under DAP Delivered at Place (DAP), the buyer pays the tariffs once the goods arrive in their country.

For Australian businesses importing goods, it is often the buyer who covers the tariff costs. Exporters, on the other hand, may or may not include tariffs in their pricing depending on the agreed Incoterms. 

It is important to clarify the Incoterms in your shipping contracts. It will help you know what you’re paying for and when. This clarity will help avoid delays, added expenses, or unhappy clients.

How Do Tariffs Work?

Tariffs are calculated using a product’s classification, value, and origin. These charges are applied at the border when goods enter a country. Australian businesses that import or export need to understand how this process works to avoid unexpected costs.

Each product is assigned a Harmonised System (HS) code. This is a global classification standard used by customs authorities. The HS code helps determine the correct tariff rate for the product.

Customs uses the declared value of the goods to calculate tariffs. This usually includes the product price, shipping fees, and insurance. Provide accurate documentation. Mistakes can cause hold-ups and extra charges.

Tariffs also depend on the country of origin. Australia has Free Trade Agreements (FTAs) with many nations. These agreements can reduce or remove tariffs on certain goods. To benefit, businesses must show that their goods meet the rules of origin.

Examples of Import Duty Rates by Country

Tariffs vary depending on the type of goods and the country they are coming from. Many of Australia’s trading partners have different tariff structures. Below are a few examples to give you a general idea:

• China: Most goods from China attract tariffs of 0-5%. Thanks to the China-Australia Free Trade Agreement (ChAFTA), many products are duty-free. However, this depends on correct documentation and product origin.
• United States: Import tariffs range from 0-10% on average. There is no full free trade agreement in place. Some goods may attract higher rates, especially under changing US trade policies.
• New Zealand: Most goods are tariff-free under the Closer Economic Relations (CER) agreement. This makes shipping between Australia and New Zealand more cost-effective.
• European Union: Tariffs can range between 4-12% for common consumer goods. Once the Australia-EU Free Trade Agreement is fully in effect, these rates may be reduced for qualifying products.
• Southeast Asia (ASEAN countries): Many goods are eligible for reduced or zero tariffs under the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA). 

Check the specific tariff rates for your product before committing to a shipment. You can use online duty calculators as a guide. But for accurate results, it’s best to consult a shipping expert like Couriers & Freight.

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Avoid hidden costs and border delays. Get expert help with HS codes, FTAs, and international tariff compliance from Couriers & Freight.

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Common Challenges and Solutions

Many Australian businesses run into problems when managing tariffs. One common mistake is underestimating the total landed cost of goods. Tariffs are often only part of the full cost. Other charges can include GST, customs clearance fees, and local delivery costs. These hidden fees can impact profit margins if not accounted for early.

Another issue is the incorrect classification of goods. Using the wrong HS code can lead to delays at customs. It can also result in penalties or higher duty rates. Each product must be classified correctly to ensure compliance and avoid unnecessary costs.

Some businesses also assume that Free Trade Agreements (FTAs) mean zero tariffs on all goods. That is not always true. Many FTAs only cover certain product categories. In some cases, extra documentation is required to claim tariff benefits. Missing these details can lead to extra charges at the border.

Incomplete or incorrect paperwork is another common issue. Customs requires specific documents for clearance. Mistakes can delay shipments or result in fines. Small errors can cause major disruptions.

The best way to avoid all these headaches is to work with shipping expert companies with end-to-end visibility of the supply chain process. Companies, like Couriers & Freight, can help businesses avoid costly errors by offering practical advice tailored to the industry and shipping routes. 

Their team has experience in international shipping and customs regulations. They assist with correct HS code classification and documentation. They also provide advice on FTAs and how to take advantage of tariff reductions.

Understanding Tariffs

If you're an Australian business shipping internationally, understanding tariffs is essential. It can impact everything, from your profit margins to how happy your customers are and when their orders arrive.

Unfortunately, many small and medium-sized businesses underestimate just how much tariffs can affect their bottom line. Using outdated info or misclassifying goods at the border can lead to unexpected fees and frustrating delays.

It pays to consult professionals for guidance.  With the assistance of professional shipping companies, you’ll save transportation expenses, accurately classify your goods, and comply with tariff regulations. Their staff can assist your company at every stage and is aware of the intricacies involved in international trade.

Businesses need to address international shipping strategically and clearly if they want to remain competitive. Understanding your tariff responsibilities aids in setting appropriate product prices and shipping conditions. 

Ship Smarter with Tariff-Savvy Solutions

Avoid hidden costs and border delays. Get expert help with HS codes, FTAs, and international tariff compliance from Couriers & Freight.

Get a Quote Now