FX International Payments
By Karen Lynch
In response, governments say they will step up efforts to address the challenges of facilitating growth in SME trade while ensuring tax collection, the protection of intellectual property (IP) rights, security, and consumer safety.
In March 2018, U.S. Customs and Border Protection (CBP) unveiled its strategy for addressing new cross-border e-commerce dynamics.1 A month earlier, the World Customs Organization's (WCO's) First Global Cross-Border E-commerce Conference gathered public officials and import-export business executives from around the world in Beijing to focus on solutions.2 And in a related development in December 2017, over 70 of the World Trade Organization's (WTO's) 164 member nations formed a group devoted to advancing multilateral trade negotiations on cross-border e-commerce.
These government commitments come at a critical time for import-export businesses, observers say. "With e-commerce, timing is everything, and companies that succeed can't be held back by customs delays," said Bram Jan Streefland, managing director of the ViaEurope logistics company.3
"We have seen B2C e-commerce grow at a faster pace than most other industry sectors in recent years, with premium cross-border shipments growing from 10 percent to more than 20 percent of the volumes of DHL Express," said DHL CEO Ken Allen. "There is the same potential for cross-border B2B e-commerce to grow at a dynamic pace."4
According to a global e-commerce report by IDC and ORC Research, "the majority of retailers are expanding cross-border, with a third of respondents rating international selling as a top growth lever for the business." One reason for heightened interest in import-export e-commerce business is that domestic e-commerce markets have entered a period of saturation and maturity, the report said.5
Many import-export businesses are concerned about the potential downsides of customs compliance processes and miscalculations regarding cross-border tariffs and taxes, the report said. While SMEs often rely on major e-commerce marketplaces such as Amazon and Alibaba to handle complex border requirements,6 the report cited competitive tensions. "Delivery experiences and speed of fulfillment play a key role in securing and retaining new customers and promoting a long-term relationship – more now than ever before," the report said.7
"Technology-enabled global trade by [SMEs] is diffused, package-level, and about very, very large numbers," according to the International Chamber of Commerce (ICC). In its promotion of import-export business, the ICC has called for what it termed "Trade Facilitation 2.0," building on the Trade Facilitation Agreement currently being implemented around the world by members of the WTO. A priority would be enabling SMEs to sell goods online more efficiently.8
One solution supported by the ICC is a higher de minimis value.9 This involves the minimum dollar threshold for subjecting goods to customs procedures and duties. Higher de minimis values can reduce costs associated with duties and fees, accelerate shipment delivery through customs clearance, and reduce documentation requirements, according to the United Parcel Service of America (UPS).10 The U.S. raised its de minimis threshold from $200 to $800 in 2016,11 while other countries have much lower thresholds, according to tradevistas, a trade promotions group.12
"A higher de minimis threshold, for example, would save government agencies from expending resources on assessing low value parcels while increasing the incentive for anyone to engage in cross-border e-commerce," the ICC said. "SMEs are hurt the most in countries with low de minimis levels because of the disproportionate amount of clearance fees paid for low value shipments."13
Other ICC proposals in support of import-export business include enhancing cooperation between trade and postal administrations and creating a globally consistent program for "trusted e-commerce shippers" that incorporates customs facilitation.
But it remains complicated. "E-Commerce shipments pose the same health, safety, and economic security risks as containerized shipments," according to CBP Acting Commissioner Kevin K. McAleenan. For example, "transnational criminal organizations are shipping illicit goods to the United States via small packages due to a perceived lower interdiction risk and less severe consequences if the package is interdicted. Furthermore, new or infrequent importers often possess less familiarity with U.S. customs laws and regulations, which can lead to the importation of non-compliant goods."14
CBP's solutions emphasize educating the import-export business community, streamlining enforcement processes, leveraging enforcement partnerships with agencies abroad, and improving data collection. "CBP's first e-commerce strategy positions CBP to address the various complexities, opportunities, and threats resulting from this global shift in trade to an e-commerce platform," the agency said.15
At the global level, meanwhile, the Beijing WCO conference produced a commitment to find new approaches and policies to address the challenges posed by cross-border e-commerce. The "Beijing Declaration" focused on areas including stronger cooperation within the international customs community through the exchange of information, mutual recognition of control and facilitation mechanisms, and mutual assistance regarding law enforcement and facilitation. It also called for enhanced cooperation between the WCO and other international organizations.16
The declaration also acknowledged the set of e-commerce principles drafted by the WCO's Policy Commission in December 2017, which delved into the issues at a more granular level. To simplify clearance procedures for small shipments or parcels, for instance, the commission has called for simplified return/refund procedures, such as "control of return shipments by reconciling the inbound with the outbound shipment and granting duty exemption on re-importation."17
A WCO survey of members provided details about e-commerce practices around the world, including some promising news – in Denmark, at least. There, an automated system handles low-value shipments below the de minimis level within a maximum of 15 minutes, and performs risk assessment of declarations and the collection of value-added taxes. In other countries, however, "risk assessment for low-value e-commerce shipments, especially postal items, is highly manual, resource-intensive, and performed in real-time at the border."18
At the conclusion of the Beijing conference, WCO Secretary General Kunio Mikuriya promised change. "The WCO is ready to deliver inclusive global standards and provide all necessary support to meet the expectations of all stakeholders towards further supporting cross-border e-commerce in a harmonized and efficient manner," he said.19
E-commerce is increasing pressure on customs agencies and other border authorities, as the sheer volume of smaller packages increases. Companies in the import-export business may not be able to afford losing time in today's rapid-delivery market, and SMEs can hardly afford more costs. Government officials around the world are promising to step up efforts to speed shipments through customs procedures.
Karen Lynch is a journalist who has covered global business, technology and policy in New York, Paris and Washington, DC, for more than 30 years. Karen also is a principal at Content Marketing Partners.
1. “CBP Releases E-Commerce Strategy,” U.S. Customs and Border Protection; https://www.cbp.gov/newsroom/national-media-release/cbp-releases-e-commerce-strategy
2. “First Global Cross-Border E-commerce Conference Concludes with Beijing Declaration,” World Customs Organization; http://www.wcoomd.org/en/media/newsroom/2018/february/first-global-crossborder-ecommerce-conference-concludes-with-the-beijing-declaration.aspx
3. “Going Dutch: How Schiphol is Solving Cross-border E-commerce Issues,” Air Cargo World; https://aircargoworld.com/allposts/going-dutch-how-schiphol-is-solving-cross-border-e-commerce-issues/
4. “DHL and Cranfield School of Management Report: E-Commerce is Transforming B2B,” Deutsche Post DHL Group; http://www.dpdhl.com/en/media_relations/press_releases/2018/dhl_cranfield_school_of_management_report_e-commerce_transforming_b2b.html
5. Evolution at Home, Revolution Abroad: The 2017 Global E-commerce Report, IDC and ORC Research; https://www.pitneybowes.com/us/campaign/ecommercereport2017.html
6. “What to Expect from the Logistics & Shipping Sectors as E-Commerce Grows Up,” SupplyChain24/7; https://www.supplychain247.com/article/what_to_expect_from_the_logistics_sector_as_ecommerce_grows_up
7. Evolution at Home, Revolution Abroad: The 2017 Global E-commerce Report, IDC and ORC Research; https://www.pitneybowes.com/us/campaign/ecommercereport2017.html
8. WTO Business Focus Group 1: MSMEs and E-commerce, International Chamber of Commerce; https://cdn.iccwbo.org/content/uploads/sites/3/2016/10/WTO-Business-focus-Group-1-MSMEs-and-e-commerce.pdf
10. “Want to Grow Your Business Globally?” UPS; https://solvers.ups.com/want-to-grow-your-business-globally/
11. “De Minimis Value Increases to $800,” U.S. Customs and Border Protection; https://www.cbp.gov/newsroom/national-media-release/de-minimis-value-increases-800
12. “’De Minimis’ Thresholds Are Not Trivial,” tradevistas; https://tradevistas.csis.org/de-minimis-thresholds-not-trivial/
13. “E-commerce Can Make Trade More Inclusive, but Greater Coordination is Needed,” International Chamber of Commerce; https://iccwbo.org/media-wall/news-speeches/e-commerce-can-make-trade-inclusive-coordination-needed/
14. “E-Commerce Strategy,” U.S. Customs and Border Protection; https://www.cbp.gov/sites/default/files/assets/documents/2018-Mar/CBP-E-Commerce-Strategic-Plan_0.pdf
15. “CBP Releases E-Commerce Strategy,” U.S. Customs and Border Protection; https://www.cbp.gov/newsroom/national-media-release/cbp-releases-e-commerce-strategy
16. “First Global Cross-Border E-Commerce Conference: Beijing Declaration,” World Customs Organization; http://www.wcoomd.org/-/media/wco/public/global/pdf/about-us/legal-instruments/declarations/beijing-declaration-1022018.pdf?db=web
17. “Resolution of the Policy Commission of the World Customs Organization on the Guiding Principles for Cross-border E-commerce,” World Customs Organization; http://www.wcoomd.org/-/media/wco/public/global/pdf/about-us/legal-instruments/resolutions/policy-commission-resolution-on-cross_border-ecommerce_en.pdf?la=en
18. “WCO Study Report on Cross-Border E-Commerce,” World Customs Organization; http://www.wcoomd.org/-/media/wco/public/global/pdf/topics/facilitation/activities-and-programmes/ecommerce/wco-study-report-on-e_commerce.pdf?la=en
19. “First Global Cross-Border E-commerce Conference Concludes with Beijing Declaration,” World Customs Organization; http://www.wcoomd.org/en/media/newsroom/2018/february/first-global-crossborder-ecommerce-conference-concludes-with-the-beijing-declaration.aspx