U.S. Agency Official on International Commerce
Many ecommerce merchants are drawn to selling products to customers in different countries. However, the complexities of international sales may include tariffs, customs and export laws. For United States-based merchants, the U.S. Department of Commerce can help. It has just released a free PDF manual called Preparing Your Company for Global Ecommerce to assist merchants with export earnings.
The official responsible for the manual is Ken Walsh. He's an international trade specialist with the U.S. Commercial Service, an agency of the Department of Commerce, and he talked with us about it.
Practical eCommerce: Inform us about the U.S. Department of Commerce's international ecommerce manual and why it exists.
Ken Walsh:"The manual is there to help companies understand what they have to do to receive their back-of-the-house systems in place so as to export efficiently. Including new information to be gathered on their products and by their clients, specialized training that is required to comply with export laws, shipping considerations, terms of sale -- a lot of things that will need to be addressed. The guide does this in a logical order that explains not only the motives for these new business processes, but plans about the best way best to implement them.
Our products:
"The guide includes case studies from successful online exporters that walk them through the issues they faced and how they handled them. What we noticed is that there are a huge number of resources out there on promoting your site globally or localizing your site to appeal to foreign clients, but there is not lots of comprehensive information in one place about what changes you will need to make in your company after these orders start rolling in. This guide tries to address that situation."
PEC: What changes are you referring to?
Walsh:"Firms will need to check out their whole business process when they are considering exporting. Exporting isn't just selling to a different territory. It is taking new information regarding your products and what you are selling and having the ability to incorporate into new export documentation and new kinds of information that you will need to supply to foreign governments and to your shipper so as to successfully get these products to your clients."
PEC: In a hypothetical example, say a U.S.-based ecommerce merchant should send to the country of Australia. Would you give us some notion of some of the export laws and the paperwork that merchants may not know about?
Walsh:"Let me talk about some of the various things which you want to consider and then I will help you through the Australia example.
"When retailers start exporting, lots of the frequent questions are all about documentation and tariffs. Tariffs are taxes which are applied by foreign authorities on imports. Thus, when you ship goods internationally, there's an entire set of information that's required by your shipper, by overseas customized services, and at times from the U.S. government, that is not needed for domestic sales. This information can be quite confusing, and lots of times the merchant either gives up or makes errors which could prove costly for them.
"Let's say you are a merchant that sells diapers and you choose to move to a complementary item like baby formula. The marketing will be pretty simple, but now you face plenty of business challenges. You will need to monitor expiration dates, and that you did not have to perform for diapers. You will need to post allergy notices in your product descriptions. You want to be concerned with the physical surroundings of your warehouse, such as dampness or heat. Well, exporting is comparable. If you really need to be prosperous, you will need to look at it as kind of a new means of doing business instead of just selling into a new land.
"The Australia example is a excellent example because the USA has a free trade agreement with Australia. That means the overwhelming majority of U.S. products enter the country tariff-free or tax-free.
"What you will need to do first is communicate with your buyer about who is responsible for transport, for insurance, for taxation -- who is paying for everything -- and let's say the buyer has agreed to cover those charges. If you have read our manual and done some additions to your business processes, it ought to be pretty simple to ship. You will have to prepare your cargo using a packing list and a special file called a commercial invoice. The commercial invoice contains all of the information that Australian habits must calculate the tariff.
"Some technical information you put on this commercial statement includes something known as a'harmonized amount,' which is a numerical code that identifies your product type. It's something that's going to be quite new to you in the event that you have not exported before, since it is not something that you need for national sale. Then you're also likely to have to include the country of origin of the item.
"With these two pieces of advice, Australian customs determines what the tariff will be to bring this product to the country. Your shipping company will then bring the product through customs, pay the tariff for your benefit and deliver the merchandise to your client. Then, the customer will be asked to cover those tariffs since you have agreed that beforehand.
"You can see why it is extremely important to clearly communicate with your customers or with your clients that are paying for these kinds of charges so they're not surprised. You definitely don't need to send a product all the way to Australia, have it go through customs, have paid to have it sent all the way, and then they deny the shipment because they did not know they had to pay tariffs. You will need to be very clear on how you are communicating. Then at that moment, the client either will accept the order, pay the tariffs and there you go. If you have all of the information that you will need to get this product to the client ahead of time, it is actually a fairly simple procedure."
PEC: Do shippers like USPS or UPS automatically calculate tariffs so the U.S.-based merchant can collect those monies during the online checkout procedure?
Walsh: "Yes. This is among the more complicated tasks concerning exporting. When something is delivered to a client abroad or internationally, when it gets to their door, the cost that they are paying is known as a landed cost. The landed cost includes not only the price of the item, but also the price for insurance, shipping, taxes and tariffs. In an ideal world, the customer want to understand the landed cost before they click on'yes' on the shopping cart, and there are a good deal of those third-party service providers which you may hire to incorporate that into your site that will assist you calculate those obtained costs.
"You can sort of follow two paths. The best customer support is to supply the landed cost at the time of this order (collecting those taxes and shipping fees and tariffs in advance), so that if the item arrives at their door, they all have to do is sign their name and accumulate the item. There are a number of risks as you can not be a hundred percent accurate on what the tariffs or shipping fees will be. You really need to make a best guess estimate and that is where those third party shipping suppliers can help you estimate those tariffs.
"Like I say in the guide, you might lose some money on a single order, but you are likely to make some money on a different order concerning the shipping charges. Hopefully all those charges will break even. What you are really making money on is supplying the item. So, keep your profit margin on the goods and be certain you're breaking even on the transport and the tariff charges."
"So, shipping companies like UPS can do these things, and there are also [third party ] companies which are designed to take over your shopping cart on your site. They calculate all of the transport and tariff codes and the payment goes through that third party, or they can place a widget, or some type of a software, in your website so the calculation is done instantly and you'll be able to collect the cash directly. There are a whole lot of different choices out there which you ought to explore."
PEC: Can you mention a few of those third-party firms' names?
Walsh: "One is BongoUS. Another is GlobalShopex. You can look for international shipping solutions or tariff calculation on any search engine and you will get a whole list of businesses."
PEC: Inform us about the U.S. Commercial Service, its mission, and it has published this guide.
Walsh: "The agency I work for is the U.S. Commercial Service, which is part of the U.S. Department of Commerce. Our sole purpose is to assist U.S. companies increase their exports. One way we do this is by generating guides and instructional programs like this ecommerce exporting manual.
"We have offices throughout the USA in about a hundred different cities, and we have commerce specialists that have the ability to answer these very questions that we are discussing today. They could sit down with you, in your company, in your workplace, to develop a strategy about how you will be a successful exporter.
"Additionally, we also have offices all around the world in about 80 countries where we have people known as commercial officers who know how to conduct business in these countries. They can help with any customs issues and help you determine what would be the best search engines there, how do people buy products there, and what would be the best prospects in these markets. It's a complete service export assistance program that is financed by the U.S. Department of Commerce and they are prepared to help you in all your exporting needs."
PEC: What are some common mistakes that you see merchants making with exporting?
Walsh:"If you would like to appear at the big picture, it is treating an international sale just like a domestic sale. In actuality, one of our case studies in the manual is Red Rocket Hobby Shop. They had been getting orders from Canada and they simply filled them like a normal domestic order and did not take into account those taxes and tariffs that we spoke about. They were filling these orders for possibly a month or two, and they got a bill in their shipping company that said,'You owe us all these tariffs that we have been collecting for your benefit.' It was a complete surprise for them, and on lots of those orders that they lost money or broke even.
"What they did not understand is that shipping internationally is another means of doing business. You will need to actually understand what the consequences are when sending a product abroad -- who is taking the probability of that solution and who is paying all these additional charges -- or you might end up with a bill in a few weeks or a few months after the fact and you have not accounted for that in your sales price. That's a frequent mistake on a wide level.
"Specific mistakes are that they simply don't understand how to fill out specific documentation or they do not know how to place the right codes into particular forms. That is where we get plenty of our calls from the very first time exporter. That often leads into a procedure of us looking at the entire company and the way we could make the exporting process more efficient and more rewarding for you."
PEC: Are there certain kinds of merchandise that merchants may not realize are prohibited to ship to certain states?
Walsh: "Yes, absolutely. I really don't want to frighten people away, but we do need to be realistic that there are export legislation and export legislation control certain commodities. Some obvious ones are firearms. There are a great deal of sporting equipment businesses which supply hunters and transport generators, shipping bullets, shipping riffle scopes, shipping riffles overseas. A whole lot of times you are going to need a permit to do that.
"Some more benign things are night vision binoculars. There are certainly lots of uses for the ones that aren't military specific; safety guards can surely use them, hunters may use them, naturalists can use them. But, those are a few controlled items, and sending those types of things abroad could cause some real liability concerning fines and even jail time."
PEC: Can merchants contact the U.S. Commercial Service if they have questions or concerns about products they're selling, or is that covered in your ecommerce manual?
Walsh: "Yes, absolutely. The ecommerce guide is a review of the regulations, including specific sites which you can access to find training on the regulations. However, you could always call a U.S. Commercial Service officer in those 100 cities across the U.S. To locate your regional office, go on the world wide web to Buyusa.gov and put in your zip code. Only call them [with your query ] and we'll get the right solution for you."
PEC: Anything else on your mind today for our readers?
Walsh:"We talked a lot today about problems and issues and hassles, and I do not want to leave retailers with the feeling that exporting is overly intricate and not worth it. So, allow me to just leave off with a few basic facts. Small- and medium-sized businesses account for nearly 97 percent of U.S. exporters, and more than two-thirds of exporters have fewer than 20 employees. Thus, you do not have to be [a giant firm ] to export. You can be a little company that just needs to boost its sales. Ninety-five percentage of the world's customers live outside the USA and 70 percent of the world's income is generated outside america. There is a growing middle class out there -- plenty of customers, tons of disposable income -- and we need U.S. retailers to capture that market. You'd be surprised at the number of retailers post on their site'we don't ship outside the United States' or'we don't meet international orders.' How many retailers simply discard inquiries from other nations? Using the U.S. Commercial Service, third party providers, your transport firm, and our free PDF manual is a fantastic step that will assist you capture this awesome market."
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