Fighting Friction in Cross Border Ecommerce

 

The Internet has enabled online retailers to expand the reach of their business from around the block to around the country and more recently around the globe. While the Internet has provided easy access for customers to shop in nearly any country and retailers to have truly global markets, the reality of getting purchases to the consumer is fraught with challenges. These challenges are being met head on by postal operators and express companies who stand much to gain in terms of international package business if the friction points can be eased. This was the subject of a session entitled  Global Delivery – Issues, Challenges and Solutions at PostalVision2020/4.0-“Pathways to a New Postal Paradigm”.

The simple steps so familiar in domestic ecommerce transactions can become complex and difficult once the purchase crosses a border. One of the more obvious differences is the assessment of duty and/or tax by the destination country. Some online retailers have provided duty and tax calculations for cross border orders but in many other cases, the customer may be unaware of the requirement to pay duty and or tax for their purchase. But providing total delivered cost for cross border purchases can be complex and costly to implement.  In order to calculate duty, products shipped cross border must be classified under the rules of the harmonized tariff schedule, an arcane process that is the sweet spot of customs brokers.

The good news is there are companies such as Amber Road, Pitney Bowes and ebay that can assist retailers with this task. In addition, there are possibilities to streamline this process by building  databases of  products that can be classified simply by scanning the UPC or EAN code on the package. There  also a number of third party companies that work with retailers and handle all the cross border requirements. Although this facilitates the cross border transaction, this approach is not particularly efficient and adds to the overal cost compared to an approach where the online retailer ships directly to the customer.

On the postal side the UPU has work underway to provide a classification guide for products which will assist posts wordlwide in simplifying the classification task. The UPU is also piloting an online declaration system that will enable sellers to check to see if a product is acceptable export and import and the total cost.In some Latin American countries, customs has adopted the practice for ecommerce shipments of aggregating products under broad categories such as apparel  and electronics and assigning a duty rate. While this is an expedient, this sort of an informal approach is unlikely to be adopted outside the region, especially with the UPU guide in the works. Other friction  points include export and import compliance regulations which can restrict certain types of products from being shipped from a country or to a country. Typically, this compliance step can be included in the duty  classification/calculation process.

Returns pose yet another challenge in that customers who return items will want to get their duty and tax refunded.  In addition, the returned item must be imported back to the retailers country potentially incurring duty/tax assessment. Typically if the same carrier is used for both the original shipment and the return, there are methods to avoid reassessment of duty and tax. While there are many initiatives in the works to streamline the friction points, significant challenges and hard work remain. PostalVision2020 will be focusing on the evolution of cross border ecommerce and the solutions for retailers, consumers, express carriers and posts.

By Mike Comstock

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