Chapter 2 Cross-border Ecommerce Logistics: Preparing Your Business for International Success
According to PPRO, global ecommerce is increasing annually at a rate of 14%. Shipping internationally sounds complex and intimidating, and it doesn’t help that the industry has a reputation of having a lack of transparency – especially in pricing.
Statista reports that the majority of challenges that merchants face in cross-border ecommerce are related to logistics, specifically:
- Navigating customs compliance: 51%
- Tracking deliveries across borders: 46%
- Managing delivery expectations: 43%
- Cross-border logistics: 30%
- Cross-border returns: 24%
Thanks to technology, it’s very possible for SMBs to conquer cross-border logistics by leveraging multi-carrier software platforms to scale operations.
Preparing your business for cross-border ecommerce
Before you begin shipping overseas, first check to make sure you can actually import your product into your destination countries of choice.
Some products may be considered restricted and require a special license to import. Others may be strictly prohibited.
B2C merchants will most likely be shipping small packages through air freight. It’s worth noting that shipping things by air can have an additional set of restrictions, depending on what your product is.
Does your product contain dangerous goods?
In the shipping world, dangerous goods are classified as items that could cause harm to those handling them in transit. Most dangerous goods are defined by the International Air Transport Association (IATA), the international organization that regulates air travel.
The most common dangerous goods that online merchants sell are power banks, products that include lithium ion batteries, powder cosmetics, and anything that contains liquids or alcohol.
If your products qualify as dangerous goods, be prepared to take additional steps to send your items overseas. These shipments may require extra paperwork, must be labelled in a specific way, and need to be handled carefully by the carrier. Because of this, some carriers may charge higher rates for these shipments.
Import taxes and duties
Governments tax shipments from other countries because they want to:
- Protect domestic companies from foreign competitors
- Control the flow of certain products
- Raise revenue through taxes
When you ship something to another country, you or your customer may be asked to pay additional duties and taxes before the shipment is delivered.
A simple way to calculate the tax and duty amount for your shipment is to take your destination country’s tax and duty percentage, and multiply it with the taxable value of your shipment.
Keep in mind the following:
- Tax and duty percentages will vary per country and for each category of goods.
- The taxable value is usually based on the value of the goods, but depending on the valuation method of a country, it can also include other amounts.
You can also estimate duties and taxes quickly by using a dynamic tax and duty calculator.
Do you need shipping insurance?
If the value of your product is under $100USD, shipping insurance may not be needed. Most worldwide express carriers cover domestic and international shipments with a value up to $100USD against damage or loss by default. However, this may differ with postal carriers. For example, USPS only provides an automatic $100USD coverage if you are using their Express Mail service.
It’s worth noting that these are declared value coverages, meaning it is the maximum of what the carrier is liable for in the event of package damage or loss. If the value of your shipment is above $100USD, you may want to consider buying insurance for overseas shipments if damage or loss is a concern for you.
Create a cross-border shipping policy
Before you open up your store to the world, make sure you have a cross-border shipping policy in place. By being clear about your shipping options, you will set expectations for potential customers and help build trust – in turn, increasing conversion rates.
Using a shipping policy generator can help you create a comprehensive policy tailor made for your business in a few minutes.
Offering multiple carrier solutions is key
The best way to avoid overspending on cross-border shipping is to work with multiple carriers.
Working with one carrier limits the delivery choices of your customers, and you may end up paying higher shipping costs as other local or regional carriers may offer more competitive rates within your destination country.
Offering a variety of shipping solutions also allows you to exceed customer expectations and encourage customer loyalty by providing flexibility in delivery.
To find the best carriers for your business, it’s important to compare prices, delivery times, and tracking quality.
- Pricing: This is dependent on the type of carrier you use. Postal carriers (such as the US Postal Service) are the cheapest, while express couriers are pricier (but provide better service).
- Delivery times: Some customers want fast delivery options while others are willing to wait. Offering different solutions with varied delivery times will help you appeal to more customers.
- Tracking quality: Choose a carrier that offers good tracking. This will reduce the number of customer service requests and the chances of your shipment getting lost overseas.
Choosing an overseas fulfillment partner
It can be very beneficial to work with a fulfillment partner who is located within the same country or continent as your overseas customers.
- Lower transportation costs from your manufacturer or supplier. If your fulfillment partner is closer to your warehouse, you can save on transporting goods from your factory.
- Potentially saving on taxes and duties. By making an overseas warehouse the first delivery destination for your products, your business can clear customs and handle any additional taxes & duties that need to be paid. This removes the hurdle of the customer having to pay the tax and duty, which can cause friction in the overseas delivery process.
- Faster and cheaper delivery for customers. As you are closer to your customers, shipping costs are drastically reduced and delivery times will be quicker, resulting in more satisfied customers.
- Scaling efficiently and affordably. With outsourced professionals handling your order fulfillment, shipments will be packed securely and quickly with fewer errors, making same-day dispatches possible and shortening the delivery timeframe.
What to expect when shipping overseas
Here’s what happens when your shipment first arrives at your destination country.
1. The customs officer will look at the paperwork for your shipment.
All international shipments need to have an airway bill, a commercial invoice, and a customs declaration form. Commercial invoices include important information such as the shipper and the receiver’s contact information, a description of the shipment items, and their total value.
2. The customs officer will determine if any taxes and duties apply to your shipment.
This will depend on the type of goods, their value, and the laws of the importing country. If it’s determined that the value of the goods are above the tax threshold, then the officer will check whether these taxes and duties have been paid for.
3. Customs will request payment of taxes and duties, if they haven’t been paid.
This is where the option of DDU (Deliver Duty Unpaid) and DDP (Deliver Duty Paid) comes into effect.
If a shipment is marked as DDP, this means that payment of the taxes and duties have already been paid for. Some express couriers have their own customs brokers who can process this payment for you, and they offer these services at a fixed price when you pay for your label.
However, if the shipment is marked as DDU, customs will forward the package to an independent customs broker to collect the required amount.
These brokers will contact the recipient to collect payment.
4. Once it’s confirmed that outstanding taxes and duties have been paid, the shipment is released and continues on to its final destination.
As long as you have the required paperwork and understand how to handle taxes and duties, you should have no problem clearing customs.
Managing cross-border logistical challenges
You may come across some challenges when shipping cross-border, but it shouldn’t scare you away from taking your business worldwide.
Deciding not to prepay taxes
Some sellers prefer to send shipments DDU (Deliver Duty Unpaid) since there are no processing fees that are added, on top of the duty that needs to be paid. This, in turn, makes delivery costs appear cheaper at checkout.
However, this doesn’t mean that the taxes will go uncollected. The seller needs to effectively communicate to the customer that duties will apply when the shipment arrives in customs, and the customer will be responsible for paying these costs.
It’s very common for customers to be unaware that duties even need to be paid. When they receive that call from customs requesting payment, many times it’s an unwanted surprise. This can negatively impact your customer experience.
For a smoother delivery experience, it’s recommended that sellers new to international shipping pre-pay their duties.
Your shipment gets stuck in customs
There are many reasons why a shipment might be stuck at customs. The reasons can differ in severity from high (your goods are prohibited for import) to low (having the incorrect paperwork).
To get your parcel out of customs limbo, it’s best to do the following:
- Contact your carrier directly. Premium carriers can also be customs brokers. They may have direct access to your shipment, helping you figure out what the issue is and providing advice on how to get it cleared.
- Find out if there are any outstanding taxes to be paid. Arrange payment for any unpaid taxes ASAP to settle the balance.
- Ensure there is no missing or incorrect paperwork. Provide any additional details, corrections, or paperwork that the customs official needs to finish processing.
Processing international returns
Handling international returns is tricky, but may be worth considering as 67% of shoppers check an ecommerce site’s return policy before deciding on a purchase.
Here are some tips to make international returns easier.
- Choose an express carrier. They are more reliable with tracking and have the ability to handle any customs issues.
- Consider writing off the item. If the value of the item is less than the shipping cost, it might be best to just send a replacement free of charge instead.
- Find a platform that can automate returns for you. A software like ReadyCloud can help you set up an automated returns process and allow customers to print shipping labels for returns.
Shipping cross-border may seem confusing and intimidating at first, but SMBs can tap into the thriving world of global ecommerce by utilizing cutting-edge multi-carrier software platforms, understanding the complexities of import taxes and international shipping rules, and choosing the right overseas fulfillment partner.
By doing this, your business will be able to successfully tackle the logistical challenges of international ecommerce and scale your business on a global level, breaking down barriers to growth and opening up a world of new opportunities.
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