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When it comes to getting packages through customs, online retailers need to sweat the details.
Managing Editor, International Research
Topics: Borderjump, centre for retail research, DHL, duties, eBay, European Union, FascinatorsAustralia.com.au, February 2013 magazine, FedEx, global e-commerce, Ken's Sewing and Vacuum Center, Kevin Clounch, Latin America e-commerce, Michael Hess, Nathan Hartnett, PerformanceParts.com, Pitney Bowes, PowerandPlay.com, PriveCo Inc., Skooba Design, tarrifs, taxes, U.S. Commerce Department, U.S. Postal Service, UPS, VurgeJewellery.com
Greg Griffith's motives were good. As an employee at a retailer that sells Jeep parts, he wanted to thank a repeat shopper for his business. So he threw a couple promotional hats, a T-shirt and a mug into the customer's order.
Had the customer lived in the United States the goodies would likely have been a welcome gesture. But the shopper lived in the United Kingdom. And because he lived overseas an act designed to build customer loyalty morphed into a customer service nightmare.
Griffith didn't want the shopper to pay taxes or duties for the free merchandise and so he left those items off his invoice for U.K. customs officials. But customs noticed the oversight and held the package.
To resolve the issue, Griffith had to send a new shipping invoice showing the items' value. The process extended the time it took for the shopper to get his goods by several weeks. And the customer ended up having to pay customs and tariffs.
That scenario shows that when it comes to shipping goods overseas, retailers can't let any details slip. Griffith, who is now general manager of auto parts e-retail sites PerformanceParts.com and PowerandPlay.com, learned through that experience that what may seem harmless can get a package caught in a cross-border customs maze that can postpone delivery and upset customers.
Finding ways to simplify international shipments is increasingly important as e-commerce sales outside the United States are booming. Despite a recession in Europe, online retail sales in the European Union rose 18.2% in 2011, from $219.96 billion to around $260 billion, according to the Centre for Retail Research. That's faster than U.S. e-commerce sales growth of 16.2% over the same period. And e-commerce sales in Latin America grew around 33.6% to $29.70 billion from $22.23 billion from 2010 to 2011, according to eMarketer Inc.
Shipping internationally isn't as easy as shipping to Dallas, but e-retailers willing to invest time in figuring out the intricacies say it isn't too hard. Some bootstrap it, using online resources available from the government and major shippers to cobble together the required documentation, while others implement services from online marketplaces and shipping services vendors to handle it on their behalf.
Going it alone
E-retailer PriveCo Inc. has sold and shipped products internationally since its 1998 launch. The e-retailer sells a range of products many consumers tend to keep private, from vibrators to Rogaine. CEO Tom Nardone says the company never specifically pursued international sales, but they came anyway.
Over the years, PriveCo has shipped products to consumers in 74 countries, and Nardone says today 14% of company revenue and 13% of orders shipped come from international customers. There have been some bumps along the way, but between working with shipping carriers DHL and the U.S. Postal Service, PriveCo has been able to learn the ways of international shipping. That includes knowing how to prepare packages for shipment, respecting individual countries' import rules and being ready for customer service questions.
All orders that ship internationally go through several checks before leaving the retailer's warehouse. After the international order is picked, the order routes through PriveCo's one full-time customer service staffer who verifies the destination address is valid and formatted correctly. He also pulls together all the necessary documentation, such as the packing list and commercial invoice, which is prepared using either DHL's free international shipping software or software from the USPS, and verifies that the destination country is one the State Department says is OK to do business with.
That's not to say there aren't hiccups. Some of PriveCo's more risqué products sold on Bachelorette.com are prone to problems with customs. Orders to customers in India, for example, sometimes take 30 days to arrive. PriveCo's customer service staffer routinely responds to e-mails about delays from international customers. Customer service also has to respond to questions about taxes and duties, which PriveCo does not collect. Customers have to pay any applicable fees upon delivery.
There are additional resources available for e-retailers ready to take on international shipping.
The U.S. Commerce Department offers guidance with its manual Preparing Your Business for Global E-Commerce available at http://export.gov/ecommerceguide/. The guide walks retailers through key points about merchandising, international product coding standards, taxation and tariffs, shipping rules and payments. Major shippers, such as FedEx Corp. and UPS, also have guides that walk new international shippers through the documentation they need to include. They also offer free software that can help in document preparation.
A number of documents are required in every international shipment. Those include basic forms like a packing list, complete with the details and value of everything in the box, and three copies of the commercial invoice complete with the Harmonized Commodity Description and Code.
The Harmonized Code is an international system for classifying traded products developed by the World Customs Organization. The first six digits describe the product, such as a shoe or a laptop. The last three describe the materials used. For example, a shoe might further be described as a pair of shoes with a leather upper and rubber sole.
The code is necessary because various countries place restrictions on certain materials and items from overseas. Australia, for example, allows kitchen knives but bans hunting knives, according to a restricted goods list maintained by mailing services firm Pitney Bowes Inc.
Navigating the maze
While the rules and regulations may seem tedious, retailers have to pay heed to them.
For instance, Nathan Hartnett, an Australia-based entrepreneur who ships globally from retail sites including VurgeJewellery.com and FascinatorsAustralia.com.au, learned the hard way that retailers have to assign a value to all goods shipped abroad. He shipped a replacement wedding band to a customer in Poland when the customer's ring didn't fit. The customer returned the ill-fitting ring and Hartnett shipped a replacement for free putting a value of $0 on the invoice so that the shopper wouldn't have to pay fees to receive the ring. Polish customs launched a lengthy investigation to see if both parties were trying to escape paying tax. Customs held the package for about a week before they accepted revised paperwork that contained values for all the items so that they could collect taxes.