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  June 12th, 2017 | Written by

Going Global: Navigating the Pitfalls and Opportunities of Crossborder Selling

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  • Not calculating the total landed cost is the top mistake etailers make when selling across borders.
  • Calculating the total landed cost manually is complicated and time-consuming.
  • Automation is the easiest solution to the complexities of crossborder selling.

In the first of this three-part series,‭ ‬I introduced the challenges of crossborder selling.‭ ‬In Part‭ ‬2,‭ ‬I’ll dive into some specific pitfalls and lessons learned.

Pitfall‭ ‬1:‭ ‬Total landed costs
A colleague living in India purchased some of his favorite products from a professional-looking site.‭ ‬He did not realize the business was US-based because it had sophisticated translation options,‭ ‬localization based on IP address,‭ ‬international payment tools,‭ ‬and the ability to select the desired currency.‭ ‬Further,‭ ‬the site did not state that the products would ship from the US.‭ ‬My colleague purchased items totaling‭ ‬$211.91,‭ ‬with a shipping charge of‭ ‬$14.37.‭ ‬When the‭ “‬tax‭” ‬line showed a zero amount‭ – ‬with no mention of customs duty or any other required costs‭ – ‬he assumed taxes did not apply.‭ ‬Later,‭ ‬when the shipment arrived,‭ ‬he received a notice that India Customs required an additional‭ ‬$290‭ ‬to release the shipment‭! ‬The result‭? ‬A frustrated,‭ ‬angry customer who rejected the shipment.‭ ‬In the end,‭ ‬the retailer had to pay to have the product shipped back to its facility and may have lost a customer for life.

The lesson:‭ ‬Not calculating the total landed cost—the total cost of getting a shipment from a buyer’s facility in one country to a customer’s door in another—is the top mistake etailers make when selling across borders.‭ ‬Some retailers may believe that including the duty and tax might scare customers,‭ ‬but letting customers decide not to pay the additional charge is better than misleading them.‭

Retailers have the option of remitting the customs duty and tax themselves or passing it along to the end-consumer to handle.‭ ‬Either way,‭ ‬transparency is key.‭

Calculating the total landed cost manually is very complicated and time-consuming,‭ ‬requiring a significant effort to figure out the duty rate for each item while ensuring the formulas are correct for each destination country.‭ ‬Additionally,‭ ‬the rates are constantly changing.‭ ‬Fortunately,‭ ‬a number of services now automate the calculation of customs duty‭ & ‬taxes,‭ ‬ensuring that correct formulas are used and that the duty and tax rates are current.‭

Pitfall‭ ‬2:‭ ‬Export/import declarations
A U.K.‭ ‬company ordered a unique widget from a US manufacturer.‭ ‬The manufacturer,‭ ‬which had not sold internationally before,‭ ‬utilized its current shipping company,‭ ‬which took the first order to its hub and filed the export paperwork.‭ ‬When the shipping company asked the manufacturer for the duty rate for the export declaration,‭ ‬the manufacturer had no idea.‭ ‬Anxious to keep the shipment on schedule,‭ ‬the shipping company offered to source this information.‭ ‬After months and several similar shipments,‭ ‬a British customs officer discovered the duty rate on the customs documents did not match the item descriptions on the commercial paperwork.‭ ‬The shipping company had erroneously assigned a‭ ‬0%‭ ‬duty rate,‭ ‬and the customer had applied the same wrong rate on its import declaration.‭ ‬The correct rate should have been‭ ‬5%,‭ ‬and British customs‭ ‬went after the customer as the importer of record,‭ ‬assessing‭ ‬£7,750‭ [‬almost‭ ‬$10,000‭] ‬for current and past shipments.

The lesson:‭ ‬As with the landed cost,‭ ‬most organizations don’t know about export and import declarations.‭ ‬When faced with complexity,‭ ‬they often assume shipping companies are the experts.‭ ‬But this is a risky move.‭ ‬Shipping companies have no regulatory obligation to get the compliance details right.‭ ‬An error this large will almost always lead to a negative customer experience,‭ ‬including increased costs,‭ ‬fines,‭ ‬delivery delays,‭ ‬and even shipment seizure.‭ ‬Automation is again the easiest solution.

Pitfall‭ ‬3:‭ ‬Misinformation and Fraud
A man living in Hong Kong had a lucrative business using various online marketplaces to sell to customers in Hong Kong and the EU.‭ ‬When he started selling to customers in Canada,‭ ‬customers complained about the customs duty and tax they were being charged.‭ ‬The man consulted online communities and read that if he described his items as‭ “‬gifts‭” ‬on the shipping paperwork,‭ ‬customers would not have to pay the customs duty or import tax.‭ ‬He started declaring all Canada sales as gifts,‭ ‬but eventually,‭ ‬a routine exam by Canada customs found an eBay-generated invoice indicating a commercial sale.‭ ‬Customs held the shipment for a week before finally billing the end-customer the appropriate fees.‭ ‬Even though,‭ ‬the man got a poor rating from the customer,‭ ‬he was lucky authorities didn’t fine him or seize the merchandise.

The lesson:‭ ‬Taking advice from online communities is highly risky.‭ ‬For example,‭ ‬customs authorities in many countries are adopting electronic profiling tactics to help them detect phony‭ “‬gift‭” ‬or‭ “‬sample‭” ‬labeling and other scams.‭ ‬Also,‭ ‬the customs authorities monitor these same online communities.‭

Crossborder buying and selling is serious business.‭ ‬It’s a privilege—not a right.‭ ‬These organizations could easily end up on a‭ “‬no-shipment list‭” (‬like the no-fly list‭)‬.‭ ‬It’s not worth it‭!

In Part‭ ‬3‭ ‬of the series,‭ ‬we will look at the impact of technology on international selling and what the future holds.

Amy Morgan is a senior product manager for global trade solutions at Avalara.‭ ‬She has managed cross-border compliance for companies ranging from startups to Fortune‭ ‬500.‭ ‬She is motivated by simplifying import/export problems.