Selling Internationally from the US: Customs, Duties, VAT, and How to Stay Compliant

Selling to a customer in the EU, the UK, or Canada isn’t just a shipping problem, it’s a foreign tax collection problem, and the obligation usually falls on you as the seller, not on the customer at delivery. Most US online sellers who ship internationally are surprised to learn that VAT (value-added tax, the foreign equivalent of sales tax) is often due at the point of sale, not collected by customs when the package arrives, and that registering to collect it is the seller’s responsibility once volume into a country clears a fairly low bar. Layer on US export rules, customs duty changes that have moved fast over the past two years, and FBAR reporting if you’re holding foreign payment accounts, and international sales stop looking like a simple shipping-label exercise.

Do I owe VAT when I ship a product into the EU?

Yes, on essentially every shipment, and the mechanism depends on the size of the order. The EU eliminated its old blanket VAT exemption for low-value imports back in July 2021: before that date, shipments under roughly 22 EUR came in VAT-free, and after it, every commercial import into the EU carries a VAT obligation regardless of value. What changed since then is how that VAT actually gets collected, and that’s where the 150 EUR line matters.

For consignments valued at 150 EUR or less, the EU built the Import One-Stop Shop (IOSS) specifically so a non-EU seller can register once, charge the correct EU country’s VAT rate at checkout, and remit it through a single monthly IOSS return instead of the buyer being hit with an unexpected VAT bill and a customs clearance fee when the package lands. Registration is done either directly (if the seller has an EU presence) or through an EU-based IOSS intermediary if not, which is the more common route for a US-based store. Without IOSS, the shipment still owes VAT, it’s just collected from the customer at delivery by the postal carrier or courier, along with a handling fee that often exceeds the VAT itself, which is a fast way to generate refused packages and angry customers.

• For consignments above 150 EUR, IOSS doesn’t apply at all; import VAT and any customs duty are handled through the standard import process at the border, typically with the courier fronting the VAT and billing the recipient (or the seller, under a delivered-duty-paid arrangement).
• If you sell through a marketplace (Amazon, Etsy) rather than direct-to-consumer, the marketplace is usually the “deemed supplier” responsible for collecting and remitting EU VAT on your behalf for qualifying shipments, similar to how US marketplace facilitator laws shift sales tax collection to the platform. Confirm this with each marketplace rather than assuming; the deemed-supplier rules have specific conditions.
• Selling meaningful volume into a single EU country without EU establishment can also trigger a requirement to register for VAT directly in that country above certain distance-selling thresholds, separate from the IOSS mechanism, particularly once you’re storing inventory in an EU fulfillment center.

What changed with the EU’s customs duty exemption in 2026?

The EU removed its 150 EUR customs duty exemption effective July 1, 2026. Before that date, goods valued at 150 EUR or less entered the EU duty-free even though VAT still applied to them. Since that date, a temporary flat rate of 3 EUR per qualifying low-value consignment applies as a transitional measure, running through July 1, 2028, at which point full tariff classification and country-of-origin duty rates take over for these shipments the same way they already apply to higher-value goods.

The EU’s stated reason for the change was scale: roughly 4.6 billion low-value packages entered the EU in 2024, climbing to nearly 5.9 billion in 2025, and the European Commission estimated a significant share of those shipments were undervalued or deliberately split into smaller parcels specifically to stay under the exemption. For a US seller, the practical effect is that a package that used to clear EU customs with VAT as the only cost now carries VAT plus the 3 EUR flat duty, with a further increase in cost coming once the transitional period ends in 2028 and standard duty rates by product classification apply instead. Build this into your landed-cost math for EU orders now rather than discovering it in a margin review later.

How does UK VAT work for goods under 135 GBP?

The UK runs a parallel system to the EU’s, set at a different threshold. For consignments valued at 135 GBP or less sold to a UK consumer, the overseas seller is responsible for charging UK VAT at the point of sale and registering with HMRC to remit it, unless the sale runs through an online marketplace, in which case the marketplace is treated as the deemed supplier and takes on that collection duty instead. Above 135 GBP, the transaction reverts to the standard import model: VAT and any applicable customs duty are collected at the border rather than at checkout.

The threshold is measured on the value of the whole consignment, not item by item, and it’s based on the intrinsic value of the goods (not including shipping and insurance charged separately). As of the most recent UK budget announcement, the government has signaled it intends to remove the customs duty relief on low-value imports by March 2029 at the latest, following a consultation that closed in early 2026, broadly mirroring the direction the EU has already taken. That change affects the duty side only; the VAT collection mechanics described above are unaffected for now.

• If you sell UK-bound goods only through a marketplace like Amazon or Etsy, confirm the marketplace’s VAT handling before assuming you need your own UK VAT registration; for consignments under 135 GBP sold through a covered marketplace, the platform typically has already taken on the collection duty.
• If you sell UK-bound goods through your own site (Shopify, WooCommerce) and your UK-bound orders regularly fall under 135 GBP, you need a UK VAT registration and a process for charging UK VAT at checkout, structurally identical to the IOSS approach for the EU but run through a separate HMRC registration rather than the EU’s IOSS system.

Do I owe anything selling into Canada?

Potentially, and the trigger is a revenue threshold rather than a per-shipment VAT collection rule like the EU or UK. Canada requires non-resident vendors to register for GST/HST once their sales to Canadian customers exceed CAD 30,000 in any rolling 12-month period, under the simplified GST/HST registration regime for non-resident businesses. Registration under the simplified regime can be completed online without a Canadian address or local representative, but it comes with a tradeoff: a seller registered under the simplified system collects and remits GST/HST but cannot claim input tax credits on Canadian business expenses, unlike a normal GST/HST registrant.

Physical goods shipped from the US into Canada also pass through Canada’s own de minimis and courier low-value shipment programs at the border, which are separate from the GST/HST registration question above and set their own duty and tax thresholds for low-value parcels, particularly favorable ones for goods qualifying as US or Mexican origin under the Canada-United States-Mexico Agreement. Because these courier thresholds have shifted with ongoing US-Canada trade friction over the past two years, verify the current figures with your courier (or CBSA directly) at the time of shipment rather than relying on a number that may already be stale by the time you read this.

• If you store inventory in a Canadian fulfillment center to speed up delivery to Canadian customers, that physical presence can independently create a full GST/HST registration obligation (not the simplified, no-ITC version), the same way US inventory nexus works for state sales tax, covered in the Amazon FBA nexus guide.
• Selling to Canadian consumers without triggering the CAD 30,000 threshold requires no GST/HST registration on your end; the customer’s own import duty and tax at the border (if any) is handled through the normal customs process rather than your responsibility.

What are my US export obligations, and transfer pricing?

Exporting consumer goods out of the US is generally straightforward: most products fall under the EAR99 classification of the Export Administration Regulations, meaning no export license is required to most destinations, and the compliance burden is limited to correctly classifying the item and filing the right paperwork above a value threshold rather than obtaining government approval before shipping. The exceptions are goods with dual-use potential (electronics with encryption capability, certain chemicals, specialized equipment) or shipments to a small list of sanctioned or restricted destinations, both of which require checking the item’s actual Export Control Classification Number rather than assuming EAR99 applies by default.

For reporting, every export needs a Schedule B number, the Census Bureau’s export-specific classification code (a more granular cousin of the HTS code used for imports), found through the Census Bureau’s Schedule B search tool. Once a single Schedule B classification shipped to one consignee on one day exceeds $2,500 in value, an Electronic Export Information filing is required through the Automated Export System, under the Foreign Trade Regulations at 15 CFR Part 30. A filing is also required regardless of value if an export license is needed or the destination is a restricted country.

If your international sales grow to the point where you set up a foreign entity, a UK company to hold EU-facing inventory, a Hong Kong entity for sourcing, transactions between that entity and your US business need to be priced at arm’s length under IRC 482. This becomes relevant the moment there’s a related-party transaction crossing the border (your US company “selling” inventory to your own foreign subsidiary at an internal price, for example); pricing that transfer favorably to shift profit into a lower-tax jurisdiction is exactly what Section 482 exists to prevent, and getting it wrong on a growing structure is a materially bigger problem than getting VAT wrong on an individual order.

Finally, if any of this activity leaves you holding a foreign bank account or a foreign-currency balance in a payment processor (a UK bank account to receive marketplace payouts, a multi-currency Payoneer balance, an EU entity’s operating account) with an aggregate value over $10,000 at any point during the year, FBAR reporting on FinCEN Form 114 applies under 31 USC 5314, and Form 8938 under FATCA may apply separately depending on your filing status and where you live. Neither of these thresholds cares whether the account generated income; they’re triggered by the balance existing, and the penalties for willfully skipping FBAR start at the greater of $165,353 or 50% of the account balance per violation.

What should I do next?

Pull your sales by destination country for the trailing 12 months and check each major market against its actual current threshold, since several of these figures (the EU’s transitional duty rate, UK’s timeline, Canada’s courier program) have moved within the last year and will likely move again. Register for IOSS if EU sales are a meaningful channel and you’re not already collecting VAT at checkout. Confirm your marketplace’s deemed-supplier status in writing rather than assuming coverage.

• E-commerce sales tax nexus: when your online store owes tax in another state, the domestic mirror of the foreign VAT registration question
• Amazon FBA tax issues: inventory nexus, 1099-K, and what sellers actually owe, how foreign fulfillment-center storage compares to US FBA nexus exposure
• E-commerce entity structure: LLC vs S-corp and when to switch, relevant once international volume justifies a foreign entity and the transfer-pricing questions that come with it

Related guides:

• Ecommerce Amazon Fba Tax Inventory Nexus
• Ecommerce Dropshipping Tax Sales Tax Income
• Ecommerce Entity Structure Llc Scorp Tax Planning
• Ecommerce Inventory Accounting Cogs Methods
• Ecommerce Quarterly Estimated Taxes Self Employment

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.