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May 7, 2021 / 0 min read - Last updated: October 11, 2022
Ecommerce sales volume is rapidly growing more and more each year. It’s no longer just a means for people to shop for products they can’t find in their area; rather, it is many people’s preferred method of shopping. Hence, it is no surprise that ecommerce is a competitive industry, and in today’s climate, you have to compete to be successful! Here’s a little secret: According to Forrester, cross-border ecommerce sales should exceed domestic ecommerce sales in most countries by upwards of 17% by 2022.
Therefore, selling and competing internationally is a critical way to expand your ecommerce business. Expanding your online business to international markets can seem like a daunting project, and it can be if you don’t do your research. You need to take certain steps and comply with international regulations to successfully operate an international ecommerce business. Our cross-border experts have broken this topic down into a simple guide. Here are the basic, high-level areas you need to be familiar with before selling online internationally:
When writing about complex topics, we like to work from global to local (broad to narrow), so let’s start with global trade compliance and end with localizations on your website. There will even be information about how you can implement every step of successful international ecommerce without all of the extra work that comes with it.
The most important factor you need to consider when planning to sell internationally is how to stay compliant with international trade regulations. Failing to comply with international laws and regulations can result in legal consequences for your ecommerce business and customer dissatisfaction. Global trade compliance = a checkmark for success. This topic can seem daunting, but we will go over some solutions at the end to help you stay compliant with global trade regulations.
Duties and taxes are arguably the most important parts of international trade as they allow countries to capture a high revenue source from international shoppers. Each country has its own duty and tax rates and other fees for imported goods. For your online business to gain trust from consumers, you need to set up your business to estimate and collect the duty and taxes at the time of sale to ensure a seamless delivery experience for your consumers. Yes, there’s an option to send an international shipment without the prepayment of duties and taxes, but our last blog post covers why that is not the most conducive option for the success of your ecommerce business.
When selling internationally, staying up-to-date on tax laws around the world is also important. For example, some laws require anyone selling low-value goods into certain countries to register for a tax ID in that country. For example, the UK requires anyone selling orders valued at or less than £135 into the UK to collect VAT (value-added tax) at the time of checkout, register for a UK VAT number, and remit to HMRC (Her Majesty’s Revenue and Customs) quarterly. Other examples of international tax laws are New Zealand and the European Union. Failure to comply with international tax laws can result in legal [or other] consequences.
A free trade agreement stipulates free (zero tariff) trade between countries/states. In practice, this also includes broader provisions, such as agreements on the movement of capital, goods, and people (such as USMCA). A free trade agreement will also mostly include all or a large portion of goods. In contrast, a preferential trade agreement is much less broad, covering preferential (i.e. low or lower than other countries) tariffs for a set of products or services. A preferential trade agreement can also just be unilateral or for a particular amount of years, etc. As an international online retailer, you need to be aware of this because you don’t want to overcharge your consumers. For example, if you are a UK online retailer selling a product of UK origin to the EU, you need to know if that product has preferential origin under the EU-UK free trade agreement. If it does, and you charge the standard duty amount, you have just overcharged your consumer; so having a shopping cart platform that handles calculations for you is critical. Keep in mind that you will need to provide proof of your products’ preferential origin when applicable.
Each country has its own list of prohibited and restricted imports. Studying your product catalog for any red flags such as commonly prohibited items in most countries (ammo, tobacco, etc.) and ensuring you’re not exporting these goods to countries where they’re prohibited or restricted is critical; otherwise, the package will never make it to the consumer, and there will likely be legal consequences. Some items that don’t seem like red flags might also be prohibited or restricted in some countries. For example, used clothing is a prohibited import in China. You can typically find a list of restricted and prohibited items on a country’s customs website.
Classifying your products is critical for international ecommerce because it helps you to calculate a more accurate landed cost. All countries use the same system to classify/describe the products: The Harmonized Code system. The Harmonized System is an international nomenclature developed by the World Customs Organization. It consists of six-digit codes so that all participating countries can classify goods on a common basis. Beyond the six-digit level, however, countries can add additional digits that further break down duty rates and allow for capturing of import/export statistics.
Having your products properly classified using HS or HTS codes for export helps determine the duty rate and any other country and product-specific fees that may apply to that product. This is important if you’re shipping with the prepayment of duties and taxes (which is recommended). Every commodity regardless of value will receive a harmonized code prior to customs clearance. It is better to include the HS code with the shipment to ensure an accurate code is used to receive the fastest clearance and most accurate duty and tax rates. You can also read more about this topic in our detailed blog post on machine learning and product classification.
We’ve touched briefly on how shipping with accurate estimation and prepayment of duty and taxes helps improve your online business’ customer experience and allows shipments to clear customs more smoothly, but let’s talk more about why having an accurate landed cost available for your consumers helps build trust in your business. If you don’t provide a breakdown of these fees for your international consumers, you are risking buyer’s remorse and future business with them.
Many consumers will assume that they are done paying once they check out on your website and they can just sit back and wait for their item to arrive. Therefore, when the consumer is required to pay duties, taxes, carrier, and collection fees upon import prior to receiving their shipment, they often have buyer’s remorse and refuse the shipment. They feel cheated by the online store. They may think the additional cost is not worth it and that it was your responsibility to have these fees available to them, or at least warn them about it.
As an online retailer wanting your consumers to be able to trust your business, this is your responsibility. As previously mentioned, estimating and prepaying duty, tax, and other clearance fees can help the package clear customs faster, allowing your customers to trust that you will get their orders to them promptly.
Don’t risk losing future business with your international consumers as well as any business you may lose through negative social media reviews; be transparent, efficient, and trustworthy by making these fees available at checkout.
Go global and feel local! Making your international consumers feel welcomed and included on your website is crucial. They shouldn’t visit your website and have to wonder if they’re able to make an international transaction. Hence, localization is important for usability and success in international ecommerce.
With all the information about providing a landed cost at checkout, it should be obvious that you need to have your website set up to accept international payments. Nonetheless, we’d be remiss not to include it because it’s so easy to overlook the little things that can make or break your international ecommerce endeavors. Ensure that your website allows international payments from each country you plan to do business with. Not only does this make the consumer feel included, but it makes the transaction possible.
Allowing international payments is critical, but so is currency conversion. Have you ever visited a website where the prices were in a different currency than yours? Did you have to go to Google and use the currency conversion calculator? Well, it’s inconvenient and discouraging, and chances are the consumer will get distracted on the currency conversion site and abandon their order. Keeping your shopper on your site until they complete their transaction helps conversions. To increase the likelihood of a potential international customer making a purchase, the customer experience needs to be as seamless as possible, and currency conversion will work wonders.
Similar to currency conversion, your international consumers whose primary language is different from your native website will not feel included if they have trouble understanding the information on your site and have to keep looking to a language translation tool. Clear communication will help to build trust in your business for international customers, and having the information on your website available in as many languages as possible will help.
All of this can seem overwhelming, and it can be if you don’t have the proper tools to implement each step. Luckily, Zonos has options to easily set up your business for successful cross-border ecommerce.
We have plugins, APIs, and tools such as Zonos International Checkout that allow you to show and collect total landed cost at checkout and ship DDP, optimize your website for international shoppers, and stay globally compliant.
Any merchant currently using Zonos International Checkout or Landed Cost can sign up for our Landed Cost Guarantee. Zonos stays on top of the non-resident country taxation for Landed Cost Guarantee customers by doing the following:
Current countries with non-resident country tax schemes, include Australia, New Zealand, Norway, Indonesia, Switzerland, and the United Kingdom (UK). The EU will impose a new tax scheme July 1, 2021.
Zonos has an industry-changing tool called Classify that generates on-demand harmonized (HS) codes upon request.
Zonos Quoter allows you to get instant duty and tax quotes to make your life easier.
Zonos Hello is a completely FREE widget to help you globalize your website’s shopping experience. With Hello, your shoppers are welcomed in their language so they immediately recognize your business sells and ships internationally.
Your customers can also get estimated costs for duties and tax as they add items to their cart with prices converted to their local currency based on GeoIP recognition and the latest currency exchange rates.
A love of bringing words together to create clear, simple messages about complex topics has driven me to pursue a career in professional writing. As the Content Manager at Zonos, I find excitement and purpose in decoding the complex details of cross-border ecommerce.