Author: Chrissie Nelms, Customer Support Manager, Rush Order
As the world becomes increasingly flat, this should mean that global supply chain management is easier than ever. Putting politics and tariffs aside for a moment, is it really getting easier?
Technology drastically improves our visibility into the status of goods in transit. Freight forwarders and customs brokers are adopting technology that allows you to “watch” your inventory move in real time from your contract manufacturer to your 3PL or warehouse receiving door.
Speaking from experience, 3PLs are also a race to improve their web dashboards, self-service tools and general ease of management overall. As a result, the inbound supply chain from the factory is clearly improving.
The same is true when moving large freight shipments outbound to B2B customers domestically and internationally. Many of these same supply chain visibility tools can be used.
However, what happens when you ship directly to a consumer in another country? It is one thing to set expectations about freight costs, duties, and taxes with another business. Unfortunately, it is a completely different game when selling cross border to individual consumers (i.e. B2C shipping).
Here are the five things your mother never told you about international B2C shipping:
Data hygiene is critical.
The customer’s address and contact info must be 100% complete. Shipping couriers like FedEx and DHL will require a specific house number, not just a street address in many countries around the world. A customer telephone number and email address are also critical. The shipment will be held at customs if this information is not available.
Re-routing shipments in transit is difficult.
Once a shipment clears customs, you can only make a change to a shipment destination if the new address is in the same country. For example, if you are shipping from the US to a consumer in France and the package has already made its way through French customs, you may be able to re-route the shipment to another address within France. However, and this a real-life example, you will not be able to update the destination to an address in Italy. The shipment cannot cross borders at that point.
This is generally true with all major shipping carriers, including FedEx, UPS, DHL, US Postal Service and others. It may not sound like a common problem, but you will be surprised how often this happens.
Be laser sharp when it comes to declaring the value of your goods.
Customs officials in the destination country will assess duties and taxes on the declared value of the shipment. The declared value on the shipment must match the pricing on your website. If the customer received a discount, both the retail price and the discounted price must be present on the commercial invoice on the shipment. The commercial invoice is usually affixed to the outside of the box in a windowed envelope. If the shipment is a warranty replacement, the warranty price usually should not be any lower than $25 USD and the manufacture’s price (or replacement cost to you) must also be listed.
Customs will reject anything reflecting a price of zero, or an artificially low price that is not accompanied by an explanation. Rush Order strongly recommends that you do not try to cheat the system by declaring an artificially low price under any circumstance. It turns out that customs officials around the world know how to use Google to find your pricing. If you are caught cheating, you may be banned from shipping to that particular country in the future.
Shipping into certain countries is nearly impossible.
Before launching a global B2C sales strategy, consider limiting the countries you ship to. For example, shipping a small parcel from the US to Russia is nearly impossible as of this writing. China is difficult too. Shipments to consumers in Brazil, India and South Africa are typically delayed and fraught with extremely high duties & taxes. We actually see duties and taxes in Brazil that exceed the value of the merchandise ordered.
Although you may wish to ship to every country on earth to maximize your sales opportunities, tread carefully.
Returned or refused international B2C shipments are your worst nightmare. Abandoning an international shipment is extremely painful, often avoidable, but is sometimes necessary. If a customer refuses your shipment because they do not want to pay duties and taxes, it is possible to find out how much it will cost to return the shipment back to your warehouse / 3PL. International returns happen for other reasons as well, but duties & taxes are usually the biggest culprit. This is true for the countries listed above in Lesson #4, but also to regions such as Europe where you or your customer will be charged ~20% VAT. As another example, Australia recently tightened its tax rules on a 10% GST.
No matter how well you message to your customers that they are responsible for all duties & taxes, this situation will happen.
To bring back an international shipment, the shipper (you), will usually be responsible for paying the duties & taxes the customs officials are demanding. You will also have to pay for the actual return shipping, as well as an additional service fee. A recent example of this service fee from FedEx was about $10 USD. So, if your international shipment is refused, it is possible that a $150 sale could cost you $25 – $150 in duties & taxes, $50 in return shipping, and $10 as an additional service fee. Then, of course, you have to refund the $150 purchase because the customer never received the item. Even in a crowdfunding scenario, customers will scream for refunds. Obviously, these costs are untenable for most companies.
In a case like this, you typically have two choices:
Option A) Abandon the shipment and sleep well knowing that you have made a customs official’s spouse or child very happy with the new item they brought home from work. This is not ideal, but potentially cheaper than shipping the item across borders back to your warehouse.
Option B) Pay the duties & taxes on behalf of the customer and continue with the shipment delivery. This way, the customer receives the product, you avoid refunding the customer, and this is less expensive than bringing the shipment back. This sounds like a reasonable workaround, but keep in mind that this customer may expose this scheme on social media and could incite other customers to refuse to pay duties & taxes as well. Who wouldn’t want to avoid paying duties & taxes if they thought they might get away with it?
The other lesser known option is to pay all duties and taxes on every shipment yourself. This creates a much more elegant customer experience but drives up the shipping & handling you need to charge to your customers upfront. This higher shipping price will likely reduce sales on the front end, but it definitely reduces headaches later.
There is no need to cry about international B2C shipping if you are careful and plan ahead. To discuss these challenges and possible solutions in more detail, please contact Rush Order for a free consultation.