Karl Wills, Managing Director of MetaPack explores International Delivery and the pertinent factors in getting it right.

International trade is more complex than domestic retailing as the number of parties involved increases, i.e. it can now include Customs and other government departments, international carriers, multiple carriers and may also involve insurers and export service providers. And although the Internet seems to have eliminated or shrunk national boundaries, there are still language and currency complications, which require clear, accurate, complete and timely information exchanges between the retailer and the customer. Handled properly, the retailer can achieve speedy delivery, low shipping costs and satisfied customers.

Unfortunately, consumers are not always aware of the additional charges or hassle ordering from abroad may bring. One major clothing retailer that enjoys substantial export revenues has recognised that when it comes to returning goods, their process ensures that they lose the customer through creating (unnecessary) frustration and expense for that customer.

Therefore, it is important that a retailer understands the language and rules for exporting before embarking on such activity. The smart retailer will also use an application that builds-in these rules and provides the retailer with a range of options to suit the various service offerings that the retailer wishes to make available.

Country of destination
When exporting outside of the EU additional documentation is required. A parcel usually needs to contain a Commercial Invoice, which should be on the outside of the package inside a clear envelope, although this is not universally enforced. Depending on the freight company used, it may be necessary to produce up to 5 copies of the Commercial Invoice.
It should however, be born in mind that for exporting purposes the EU does not include: the Channel Islands (Jersey, Guernsey, Alderney, Herm and Sark), Andorra, the Canary Islands, Monaco, Gibraltar, San Marino and the Vatican City State.

Value of goods
The next factor to take into account is the value of the goods in the package. If the goods are valued at up to £270, a CN22 form will need to be completed; quite often this form is applied as a sticker. It requires a brief description of the contents along with their value and weight. However, if the goods are valued at over £270 a CN23 form will need to be completed. The CN23 form requires quite a lot more information and will need to be inserted into a plastic wallet on the outside of the parcel. Aside from some additional general details (to the CN22) the CN23 requires, for each unique product in the parcel, the HS Tariff Code (World Customs Organisation (WCO) Harmonised System) and the Country of Origin.

HS Tariff Code and country of Origin
The HS Tariff Code and the Country of Origin are very important and are used by the Customs Department in the importing country. It is here where the amount and type of duty and taxes are calculated. In some cases goods will be impounded or refused to be imported if they contravene the local country import controls. Many countries have duty/tax exempt limits, e.g. the USA does not levy taxes or duty for goods where the total value is less than $200. However, if close to this limit the shipper should be aware that the exchange rate could very well put a parcel over this limit. Each month the exchange rates between the various currencies is fixed and available from government web-sites (HMRC for the UK), and these change at the beginning of the month. Furthermore, Customs authorities take a dim view on retailers that ship multiple parcels to a single address where each parcel happens to be below the duty exempt limit.

Responsibility to pay taxes

There are two ways in which taxes can be administered:

DDP (Delivery Duty Paid): This is where the shipper/seller is responsible for dealing with all of the tasks involved in moving the goods from the point of origin to the buyer’s door. It is the shipper/seller’s responsibility to insure the goods and absorb all risks including the payment of local taxes, duties and fees. This is sometimes referred to as Landed Cost. DDP can be harder for the retailer to administer, but the key to deriving the correct duty and tax amounts is by knowing the HS Tariff Code and Country of Origin, which are necessary for the customs paperwork anyway. The DDP calculation uses the input information, per product, and the shipping costs to calculate the total Landed Cost or DDP price. Although the actual algorithms in the DDP calculation are not complex, the data required to match the HS Tariff Code and Country of Origin against the unique and specific taxes and duties for each and every country is vast and ever changing. Virtually all exporters in FMCG markets (as opposed to bulk shipments) use outsourced companies to maintain and manage such data and calculations.

DDU (Delivery Duty Unpaid): This is where the shipper is only responsible for the delivery to the customer (sometimes only to the port of entry), but puts the responsibility for paying any import duty and taxes onto the buyer. The carrier handling the import will manage the paperwork and contact the buyer to arrange the tax and duty payment where applicable. On the face of it, that makes the exporter’s life easier. Except, that it creates a lot of hassle for the buyer and can result in the parcel being returned and the customer making a claim. Regardless, if not clearly declared and defined up-front it can make for an unhappy customer.

Exporting, even within the EU, can carry a high shipping cost. There is always a trade-off between speed of delivery and cost. Various destinations are better served by specific carriers. Furthermore, weight is no longer the main determinant of price, ‘volumetrics’ (the physical cubic space of the goods as well as any dimension exceeding a carriers pre-set limit) play a much larger part; air cargo is as much about space taken as it is weight and carriers are restricted by the handling equipment of the smallest dimension within their network or partner network.

Handling Returns
The cost of the return shipment is likely to be higher (for those not paid by the customer), but the inexperienced or ill prepared retailer can be faced with import duty cost even though it was paid on the original import. The well prepared retailer will ensure that it can easily reproduce the customs documentation that proves the export and then consolidate that data for presentation to the Custom authorities to reclaim the double duty. Therefore, it is important that whichever application used by the retailer has the ability to store and re-print the customs documents relating to the original order (as well as complying with the mandatory requirement to retain and produce such information for up to six years).

The full white paper can be downloaded at http://www.metapack.com/index.php/downloads/white-papers

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Published on: 9:38AM on 14th June 2010