Speeding up international e-commerce deliveries via customs solutions
Customs brokerage is the linchpin for a successful cross-border-e-commerce transaction, and for many small and medium-sized businesses, understanding international trade requirements is critical when expanding globally. Small and medium-sized businesses are a strategic focus for both FedEx and UPS. Each company is expanding its value-added services, including customs brokerage, to attract this group of businesses beyond simply performing last-mile deliveries.
The latest data from the US Small Business Administration (SBA) finds that there are 31.7 million small businesses. In comparison, there are 20,139 large businesses. The SBA defines a small business as one that has fewer than 500 employees.
The number of small businesses is growing. According to the US Census Bureau, 4.3 million new business applications were filed in 2020, up 24% from 2019. Although it is not known how many small businesses sell online, Amazon noted that small and medium-sized business products account for more than 60% of all units sold on Amazon’s online stores.
E-commerce
Indeed, e-commerce growth has skyrocketed. Already on the rise before the COVID-19 pandemic, US e-commerce retail sales jumped 32.4% in 2020 from 2019 to $791.7 billion, according to the US Census Bureau. For the first quarter of this year, e-commerce retail sales are up 39.0% from the same period in 2020 to $196.7 billion.
However, the real growth potential is in cross-border e-commerce. According to a research report from fintech consulting and research firm Kaleido Intelligence, globally, cross-border e-commerce will grow 15% CAGR between 2018 and 2025 to $1.6 trillion in 2025 versus 11% CAGR for domestic transactions values to $5.5 trillion in 2025.
Customs brokerage solutions
To address the growing number of parcels waiting to enter a given country, countries, including the US, are making it easier and faster for e-commerce imports to enter the country.
The US Customs Borders & Patrol (CBP), for example, introduced what’s generally called Section 321 in late 2018, which allows qualifying merchandise to be imported into the US by “one person on one day” and has a total fair market value of $800 or less. In May, the CPB recognized fulfillment centers and domestic warehouses as “one person” for any goods that have not been sold to a specific consumer at the time of importation into the US. In fiscal 2020 (the 12 months ending September 30, 2020), 768 million Section 321 bills of lading and mail were filed. From October 1, 2020, through April 30, 2021, 530 million Section 321 filings have been made.
The European Union changed its value-added tax (VAT) requirements whereby all goods entering the region are required to collect VAT beginning on July 1. Before July 1, e-commerce sellers had to have a VAT registration in each European member country in which they had a turnover above a certain total threshold, which varied from country to country. Post-July 1, a standard EU threshold of €10,000 above which the VAT must be paid in the European member country where the goods are delivered was established. In addition, an online portal, One Stop Shop, was created where online sellers can manage all of their VAT obligations for sales across the EU.
In 2019, China’s Ministry of Finance increased the value of goods that could enter the country duty-free in a single shipment from 2,000 CNY to 5,000 CNY ($300 to $750). In addition, the accumulated value of goods that can enter duty-free over a year was increased from 20,000 CNY to 26,000 CNY ($3,000 to 3,900).
FedEx, UPS…and Amazon
In March, FedEx announced it was introducing a cross-border service during its fiscal Q4 (March-May) called FedEx International Connect Plus (FICP), which provides air service from Europe to the United States to Asia, and within Europe. Included in the new service is customs clearance.
In addition, FedEx partnered with the consulting firm KPMG to assist e-commerce customers with the EU VAT changes by offering a streamlined online portal solution at a discounted fee to help FedEx customers who are e-commerce sellers outside of the EU maintain EU compliance.
And just last week, FedEx introduced FedEx Trade Solutions, a new group in FedEx Trade Networks Transport & Brokerage that offers customized, bundled trade solutions.
“Each of our customers has a unique situation,” Bill Schweitzer, FedEx Trade Networks Transport & Brokerage, Inc. Vice President of Brokerage and Trade Solutions, said in a statement. “There is not a one-size-fits-all approach to global trade and compliance.”
Indeed, included are such services as compliance evaluation and training for imports and exports and targeted small business trade compliance.
Meanwhile, during UPS’ Investor & Analyst Day virtual conference on June 9, Scott Price, President of UPS International, highlighted the company’s International Knowledge Base, an AI-based tool on UPS.com that looks at past shipments to identify the products a customer typically ships and guides the customer to determine the harmonized tariff code correctly. According to Price, customers experience fewer delays, and shipments get to recipients on time. The tool also provides shippers with the landed cost before delivery so as no surprises to either shipper or receiver. International Knowledge Base is currently facilitating around 8% of UPS’ global export packages, and it is expected to expand to 60% by January 2022.
As for Amazon, it acquired INLT in 2019. INLT is a cloud-based software provider that allows sellers to manage costs and customs clearance of cross-border shipments.
DHL and other providers also provide customs brokerage solutions. As cross-border e-commerce grows, expect more customized solutions from other logistics and freight forwarding companies including perhaps acquisitions of stand-alone customs brokerage firms.
-Cathy
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