Want to begin exporting your products to customers around the globe? You may want to begin by exploring the complicated world of regional customs and taxation.
If you don’t know by now that the Australian import Duty-free threshold is $1,000, you must be living under a rock! Australia has the highest such threshold on the planet. Naturally, we think that the rest of the world is more or less the same.
Nothing could be further from the truth. Here are just a few examples:
- It is thought that the New Zealand threshold is NZ$400. This is not true. In fact, if the Duty and GST charges exceed more than NZ$60, a formal entry is required and charges are collected by Customs. This process normally kicks-in at a declared value of around NZ$400.
- The USA wants to know the name and address of the manufacturer of all apparel imported, mainland China requires that everyone importing is registered with Customs, all EEC countries levy the same Duty rate on imports but each country has a different Tax rate, and on and on. And on.
- The import Duty rate for girls’ swimwear is 24.9% in the US, 15% in Indonesia, 10% in New Zealand, 12% in Europe, 18% in Canada, and Duty Free in Hong Kong and Singapore. Some countries include the freight charges in the Duty and Tax calculation, some don’t. Most countries levy additional “formal entry” import fees, for example; Australia $56.20, New Zealand $46.89, the US 0.3464% of declared value with a minimum charge of $25.
No wonder retailers and consumers alike are confused and frustrated by the complexities of cross-border trade.
It’s relatively simple in the B2B world, where such transactions are repeated many times over between the parties, they have the resources to focus on getting this right and the transaction value requires that they do get it right.
For B2C, however, this is likely a new experience for the consumer, or at least not the same experience as last time. Last time I ordered an iPad from the US; this time it’s shirts from the UK.
An example of a commercial invoice via freewordtemplates.net.
There are a few basic tips that can help online retailers and their customers when it comes to international sales, exports and imports:
- Ensure that you create a separate “Shipping Information” page for customers and provide a link from your Home page
- Make it very clear what you will charge for shipping and what customers will get
- Your shipping partner can provide you with a list of countries and “de minimis” values which trigger Duties and Taxes. Publish this, so that customers are aware of when they exceed a threshold for any country
- Make it very clear to customers that payment of these charges is their responsibility (assuming that you are not paying these costs)
- Make sure you know whether your goods are travelling as “freight” or “mail” as different modes attract different focus from Customs at destination. When you change from mail to courier mode, you should get a faster, more reliable trackable service, but you will get more attention from Customs at the border
- It is important to clearly show shipping costs or estimates as early as possible in the checkout process to avoid customer price shock and cart abandonment
- It is worth considering adding a prompt for customers once you know the total sales value and the destination country. If Duties and Taxes are payable, you can add a “Please note that…” message during checkout
- When you are completing the transport consignment note, make sure that completion of the following fields is mandatory to ensure quickest, smoothest clearance at destination;
- Consignee e-mail address
- Consignee mobile number
- Make it very clear to your customer that they should direct the delivery to an address where someone is available during business hours, Monday to Friday to sign. Nothing upsets a delivery company or a customer more than no-one being home when a delivery is attempted
- A standard Sales Invoice and a declaration for Customs purposes are not the same thing! A Customs declaration will – in addition to the standard to/from, sales value information etc. – also reflect;
- A detailed description of the item sold, including the country of manufacture and the composition of the item if it is, for example, a blended fabric or leather upper and a rubber sole
- The freight charges paid by your customer. Not what you pay the courier company, what you charge your customer. In the absence of this, the destination country will use a default value, typically higher than you have charged, impacting on the Duty/Tax payable.
- The reason for shipping, normally “Sale to consumer” or similar
- The total declared value for Customs which is the sales value + the freight charge + any insurance premium paid (the “CIF” value)
These details will make life easier for the clearance agent and therefore Customs.
The options for getting these things done vary widely. There are systems that calculate all Duties and Taxes for a list of sales items for all countries worldwide and charge these at the checkout. There are retailers whose margin is such that they simply wear these costs and do not pass them on.
Whatever your budget and however fancy your system, following the above rules will ensure more customer satisfaction more often.