Going global with your business is the dream many retailers have. And the first step towards that is having an e-commerce-enabled website that allows customers across multiple countries to shop from your company.
The next step is where it gets tricky – international shipping and all the import/export documentation!
Going international with your business also means that you have to abide by compliance laws applicable in these countries. Continue reading to learn the best ways of navigating many such challenges.
What are Customs Duties and Taxes?
Just like the tax laws applicable in your home country, there are tariffs, excise taxes, and import duties applicable in other countries.
Depending on the trade barriers or trade agreements between your home country and other countries, import duty is levied on your goods. These are legal fees and have to be paid for successful shipping.
How Customs Duties and Taxes are Calculated?
Custom duties and taxes are applied to exporters to protect home-grown businesses, increase the country’s foreign income, and manage the supply of products.
There are mainly 4 ways in which import duty is calculated:
- Duty by weight of the imported products
- Duty by the overall value of the imported products
- Duty per each unit of the imported products
For eg: In a shipment of 100 same-value t-shirts, each t-shirt is charged a duty of 1 dollar.
- Compound duty – an overall percentage is calculated with a minimum benchmark
However, what you must also consider is the kind of agreement between the country of origin and the country of import. For eg, a Free Trade Agreement (FTA) between two countries minimizes import barriers, imposes less-heavy duties, and promotes import-friendly policies mutually. If your country is part of the World Trade Organization (WTO), it is legally bound to impose lighter duties and regulations on any country that is also a part of the WTO.
Navigating the Customs Clearance Process
After abundant paperwork and calculation of duties, your shipment has finally reached the country of import. Here’s what happens next…
1. Inspection by the customs officer
Having the right documentation for your product category is crucial for this stage. It starts with a commercial invoice that is mandatory for imported goods. The officer will also inspect the shipment.
2. Establishing authenticity
To be extra sure, the customs officer may also visit your website and confirm the order value to match it with the order value label on the shipment.
3. Calculation of duty
There is a minimum threshold for duty in every country. If the shipment value is beyond that threshold, duties are levied.
4. DDU or DDP is checked
DDP stands for Delivery Duty Paid where the seller has already paid the duty beforehand and the shipment is ready for release. DDU is where the Delivery Duty is Unpaid.
Therefore, the receiver has to pay the duty and take possession of the shipment. Please note that DDP can be charged to the customer at the time of checkout for easy shipping.
The tie-up with your international logistics provider is responsible for collecting the released shipment and delivering it to your customer.
Strategies for Managing Customs Duties and Taxes
1. Reduce Shipping Costs
Customers are sensitive to more days of shipping when they know they are buying from an international website.
Most customers are willing to wait than pay a huge fee for shipment. Therefore, choose a time when bulk products can be shipped as opposed to paying for one unit of shipment every time and save cost/
2. Specify Shipping Time
When shipping internationally, it is recommended to give a disclaimer than give shoppers a rude surprise. It is best to mention that shipping to certain destinations will take 14-30 days so that the customers can make an informed decision.
3. Choose the Right kind of Product
Depending on the nature of the products, rules, and regulations are applicable in each country.
For a product with exceptionally high import duty, you might want to reconsider shipping to that country.
This is especially true in the case of high-value jewellery, exotic fruits and vegetables, high-fashion clothes, foreign cars, etc.
4. Select a 3PL Partner
Partnering with a global logistics expert simplifies international shipping by handling duties, local partners, and frequent travel.
This logistics player not only acts as a broker on international grounds but ensures faster and smoother delivery.
A 3PL partner will also determine the suitable mode of transport to avoid additional freight charges.
Conclusion
One must note that understanding Incoterms – International Commerce Terms between the exporting country and importing country is the starting point of your journey.
However, understanding is one thing and execution is a whole different ball game with its many challenges.
This is where you can be smart and choose iThink Logistics as your trusted third-party logistics partner.
Our expertise in international shipping and extensive network of partnerships with international logistics chains allows you to get your products shipped across the border smoothly and quickly.
Real-time tracking, 24×7 customer support, and regular updates on your custom dashboard are just the beginning. Connect with us to take your business global!
