Earlier this year, we shared our list of common but essential parcel industry terms that often get overlooked, especially when it comes to your company’s bottom line.
This week, we’d like to continue that discussion by spotlighting several terms and names that are equally important – especially if you’re a growth-minded company that wants to break into the international fulfillment and global e-commerce market, which topped $2.3 trillion in 2017.
Some are probably already part of your working vocabulary. Others may be completely new to you. But all are hugely important for your company to consider as you begin to think about expanding your eTailing, direct selling or subscription business outside the United States.
Commodity Certification: A comprehensive vetting process that some products must undergo before they can be sold in certain countries. Many major markets like China and the European Union have some version of this certification. And failure to obtain one for your company’s products could mean that any packages it sends to those markets could be detained, destroyed, or returned to you with additional shipping charges.
Customs Broker: A business that specializes in helping companies navigate the customs-related complexities of international fulfillment and shipping, including import-export documentation and assigning the right Harmonized System (or HS) code for products. Some customs brokers operate as standalone companies, while others are part of a large carrier or 3PL. Either way, they can help you avoid considerable confusion, delays, and expense while learning your way around new global markets.
De Minimis Threshold: The maximum amount an individual buyer’s import shipment can cost before duties are charged. Although the United States’ de minimis threshold is fairly high ($800), some countries’— like Switzerland’s ($5)– are considerably lower, which means your products’ delivered cost in those areas could be significantly higher.
Delivered Duty Paid (DDP): A parcel shipping arrangement that requires the seller to be responsible for the payment of duties. Advocates of DDP say that it vastly enhances the customer experience because it gives customers better landed cost visibility and gives sellers better control of the entire order-to-delivery process. However, it could also lead to greater shopping cart abandonment because of its higher up-front price.
Delivered Duty Unpaid (DDU): A parcel shipping arrangement that requires the buyer to be responsible for the payment of duties. Fans of DDU say that it releases sellers from many of the liabilities and unexpected costs that can arise when items ship to an unfamiliar international market. However, if buyers refuse to pay duties when packages arrive, it could trigger a highly expensive return.
Denied Party/Restricted Party: A business or individual that you’re not allowed to sell to because of security concerns or suspected terrorist activities. If your company sends even one shipment to a denied or restricted party, it could be liable for criminal penalties or massive fines (including some that could reach six figures). Thus, it’s critical to check the latest U.S. denied party screening databases frequently to ensure your international sale efforts remain in compliance – or to rely on your carrier, 3PL customs broker, or freight forwarder to do the same.
Duties: The fees that must be paid before an imported product can enter a country. Some international parcel shipments are exempt from duties because of free trade agreements that exist between the United States and the country they’re traveling to – or because the value of their contents falls below that country’s de minimis threshold for individual purchases. But others can be subject to very high charges.
Freight forwarder: An international go-between that can take full responsibility for shipping large quantities of your products from one company to another. An experienced freight forwarder can help coordinate and complete all of the legal particulars of an international transit, and some also function as customs brokers. Many of the world’s largest parcel carriers offer freight forwarding as part of their service package, as do many countries’ postal services.
Harmonized Commodity Description And Coding System (HS): A six-digit, universal classification system for products and raw materials that helps ensure the proper calculation and payment of duties – and that helps determine whether your items qualify for duty savings based on various free trade agreements. There are currently thousands of “HS” categories, so finding the one that best applies to your products can be a challenge, especially if they have a variety of features, parts, or functions. Working with an experienced international shipping partner can often help.
Obviously, these aren’t the only important terms your company will need to know as it considers selling in international markets. Others include: Free Trade Agreements, Free Trade Zones and International Parcel Carriers (a large group that includes – but is not limited to – UPS, Fed Ex, DHL and the USPS).
A good big-picture consultant can advise you about the ins and outs of the international order fulfillment process, as can 3PLs like Amware, which has established relationships with well-connected international players like Asendia to help get your started in the right direction. So please, feel free to reach out to us if you’d like to learn more.