9 WAYS TO IMPROVE YOUR CROSS-BORDER AND GLOBAL PARCEL SHIPPING PAGE 22
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com
WHAT DOES THE ICS2 UPDATE MEAN FOR YOU? PAGE 7
HOW TO NEGOTIATE OPTIMAL TERMS IN YOUR CARRIER CONTRACT WHEN SHIPPING GLOBALLY.
WHAT TO WATCH ON THE INTERNATIONAL DELIVERY FRONT. PAGE 8
PAGE 16
WHAT TO KNOW WHEN WORKING WITH CUSTOMS BROKERS. PAGE 20
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Volume 29 | Issue 6
08 12 18 24 28 06 EDITOR’S NOTE The World Keeps Shrinking By Amanda Armendariz
07 UNDERSTANDING IMPORT CONTROL SYSTEM 2 By Krish Iyer
08 WHAT TO WATCH ON THE INTERNATIONAL DELIVERY FRONT By Merry Law
10 INTERNATIONAL RULES AND REGULATIONS DON’T HAVE TO BE AN OBSTACLE By Shawn Levsen
12 5 WAYS TECH CAN HELP MEDIOCRE HOME DELIVERY PERFORMANCE
16 INTERNATIONAL SHIPPING: NEGOTIATING OPTIMAL TERMS
26 CONTINUED GROWTH IN THE PARCEL SECTOR — THE RESULTS OF PITNEY BOWES’ PARCEL SHIPPING INDEX
18 PARCEL COUNSEL SPECIAL EDITION: LOSS AND DAMAGE TO CARGO IN INTERNATIONAL SHIPMENTS
28 TOP TIPS TO TAPPING INTO CANADIAN E-COMMERCE
20 WHAT TO KNOW WHEN WORKING WITH CUSTOMS BROKERS
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24 INTERNATIONAL EXPRESS SERVICE: YOUR COMPETITIVE ADVANTAGE?
By Johannes Panzer
4 PARCELindustry.com CROSS-BORDER & GLOBAL 2022
By Michael J. Ryan
22 9 WAYS TO IMPROVE YOUR CROSS-BORDER AND GLOBAL PARCEL SHIPPING
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PARCEL (ISSN 1081-4035) is published 7 times a year by MadMen3. All material in this magazine is copyrighted 2022 © by MadMen3. All rights reserved. Nothing may be reproduced in whole or in part without written permission from the publisher. Any correspondence sent to PARCEL, MadMen3 or its staff becomes the property of MadMen3. The articles in this magazine represent the views of the authors and not those of MadMen3 or PARCEL. MadMen3 and/or PARCEL expressly disclaim any liability for the products or services sold or otherwise endorsed by advertisers or authors included in this magazine. SUBSCRIPTIONS: Free to qualified recipients: $12 per year to all others in the United States. Subscription rate for Canada or Mexico is $35 for one year and for elsewhere outside of the United States is $55. Back-issue rate is $5. Send subscriptions or change of address to: PARCEL, P.O. Box 259098 Madison WI 53725-9098 Allow six weeks for new subscriptions or address changes. REPRINTS: For high-quality reprints, please contact our exclusive reprint provider, ReprintPros, 949.702.5390, www.ReprintPros.com. P.O. Box 259098 Madison WI 53725-9098 p: 608.241.8777 f: 608.241.8666 PARCELindustry.com
EDITOR’S PICK
Here are some of the most-read articles on our site in recent weeks. If you haven’t already checked them out, you might want to — there is some great information in there!
EDITOR’SNOTE
THE WORLD KEEPS SHRINKING By Amanda Armendariz
E
very day, new technologies and innovations make the world seem less vast and more accessible. Things that were inconceivable even 50 years ago are commonplace today, and nowhere is this more evident than in the cross-border and global parcel shipping arena. No longer do countries’ borders define one’s customer
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base; now, almost anyone in the world with internet access is a potential customer. But despite these vast opportunities, it’s important to be prepared before you jump into the international game. Whether your company has been shipping globally for years now or is just getting started, there are many additional considerations to take into account that are not present when shipping domestically. From negotiating a carrier contract that allows you to ship globally at the most cost-effective rate possible, to understanding how loss and damage determination changes between countries, it’s important to be armed with the knowledge you need to make this transition as smooth as possible. The information on the following pages will give you a roadmap to follow as you expand your customer base outside of the United States’ borders. We’re grateful for your continued trust in us as the small-package industry leader. As always, thanks for reading PARCEL.
Peak Season Surcharges: What Do They Mean for You? Micheal McDonagh
Six Tasks For Your Peak Season Readiness Checklist By Britain Pavlic
FedEx 2023 General Rate Increase: 6 Key Takeaways By Keith Myers
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GUEST COLUMN
UNDERSTANDING IMPORT CONTROL SYSTEM 2
By Krish Iyer
E
arlier this year, the second phase of a European Union (EU) customs program called the Import Control System 2 (ICS2) was implemented. As of March 2023, all economic operations, which are typically defined as air/ express carriers, freight forwarders, postal operators and similar entities attempting to transport goods to or through the EU, are required to submit safety and security cargo information in advance of the shipment’s arrival into the EU. This information is submitted to EU customs in the form of an ENS (entry summary declaration). The Release 2 was implemented in order to better protect against fraud and terrorism. More importantly, the system is meant to help EU customs intervene in particular situations at the most important part(s) of the supply chain without creating bottlenecks in the customs clearance process. Per the European Commission, “the new programme will remodel the existing process in terms of IT, legal, customs risk management/controls, and trade operational perspectives.” Indeed, the measure will attempt to “facilitate free
flow of trade through improved data-driven customs security processes, adapted to global business models.” ICS2 is being implemented in phases, with the first phase having begun in 2021. On March 15 of that year, certain aspects of the ENS were implemented with air express carriers and postal operators up to the aircraft/transport pre-loading process. By March 2023, freight forwarders and other air-based entities will be required to implement the ENS. By March 2024, implementing the ENS will apply to maritime, road, rail, and all economic operators. Although the long-term effects will be beneficial to the efforts to combat fraud and terrorism, as well as to streamline clearance operations, it should be noted that, in the short term, air express carriers, freight forwarders, and postal operators will be asking shippers to complete more information as part of their export process. By 2024, the recipient (consignee) could be required to complete some of the information. Information in an ENS is generally information that either the shipper, recipient, or carrier might already know. The prime element of this information is the consignee’s Economic Operators Registration and Identification (EORI) number. This is an identification number requested by an importer with the EU customs authority or by a non-EU entity who trades frequently with the EU. These elements include the consignee’s EORI
number, name and address, means of transport at the border, number of pieces/ packages in the shipment, other documents/certificates needed, UN dangerous code, and other information. Most of this information will be well known upfront to all parties, and already recorded in an air waybill, commercial invoice, or other customs documentation. With recent changes to taxation in the EU on VAT for imports, many US shippers might ask if it is even worth it to trade with the EU. The answer, however, is a resounding yes! The EU now accounts for nearly 15% of the world’s trade in goods and has consumers with preferences in apparel, home goods, and other items that are similar to those in the United States and Canada. Shippers in the US who export to the EU should work with their carriers and end recipients to determine whether or not their shipping tools adequately capture ENS information. So, while new requirements do require electronic manifesting of information prior to a shipment’s arrival into the EU, the long-term benefits of EU trade, coupled with a potentially faster customs clearance process, make trade with the EU worthwhile for US exporters.
Krish Iyer is Vice President, Strategic Partnerships & Industry Relations at Auctane and a frequent speaker at PARCEL Forum. He can be reached at krish.iyer@auctane.com.
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 7
BY MERRY LAW
WHAT TO WATCH ON THE INTERNATIONAL DELIVERY FRONT
T
he past year has brought an easing of international supply chain issues, an increase in international air transit, and fewer delays in delivery and customs. But not all developments were positive: the lingering COVID pandemic, the Russian invasion of Ukraine, the lockdowns in and tensions with China, and extreme weather events globally all had implications for the postal and delivery network. Postal operators, particularly in the less-developed countries, have not fully recovered from the continuing pandemic. Many of these problems are not reported through official postal channels, but they are clear to mailers and consolidators tracking delivery and, of course, to residents. Some are unlikely to recover without restructuring,
with a few countries reporting “new” postal operators. In addition to the devastating costs of death and displacement, the Ukraine invasion has brought both a crisis in energy and in food supplies. Energy shortages, especially in European countries, affect delivery capabilities and costs. Shortages of basic food supplies contribute to inflation generally, but also disrupt the labor supply. China’s zero-COVID lockdowns have the potential to again disrupt the supply chain. Any complete closure of a city leads to shortages of whatever products are produced in the region; ports or transit hub closures exacerbate the problem, as with the closure of Shanghai earlier this year. The tensions with the US have an unknown impact, but Taiwan, the subject of major
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tensions, produces over 50% of the global supply of semiconductors. Extreme weather causes loss of lives, infrastructure, and general disruptions. Mail or other shipments in transit are lost. Bridges and roads, houses and businesses, water and electric utilities are damaged or destroyed. Addresses change temporarily or permanently. (Again, the loss of life and human suffering need to be acknowledged. Unfortunately, these events are becoming more common worldwide). Some particular developments at the Universal Postal Union (UPU), in the European Union (EU), and at the USPS will also affect — or potentially affect — US international mailers. POTENTIAL STRUCTURAL REFORM? The UPU, the UN specialized agency
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for international exchange of mail, is again considering reform of its structure and potentially opening to the broader postal sector. Currently, each member country in the UPU names a designated operator (DO) (or possibly more than one) to provide international postal services under the terms of the UPU Convention. These DOs have access to specialized services and rates through the UPU. Opening to the broader postal sector may make some or all of those services and rates (probably with adjustments) available to delivery services other than the DOs. Currently, the US is developing its position on this important issue at the State Department. Unfortunately, the only provider of delivery services that has seen and commented on the draft position is the USPS. Since the USPS, a commercially interested party, has access to the policy-making process, it seems only right that private US parties (both users and competing delivery services) affected by these policies should have an equal chance to read and comment on the draft proposal at this stage. This would be logical under the principle of a level playing field between government agencies and private service providers. OTHER CHANGES ARE AHEAD For mail to the 27 EU countries as of March 2023, postal operators and carriers will have to comply with new requirements for pre-loading and pre-arrival customs risk assessments. The data requirements will include a complete, accurate product description, including the Harmonized System (HS) code, and other data elements on the sender and the recipient. The second phase of the EU’s Import Control System 2 (ICS2) specifically applies to postal operators and air carriers, who will not be allowed to off-load without prior authorization. The customs data is ultimately provided by mailers or their service providers to the USPS through the customs forms and electronic data submitted with packages and goods sent internationally.
The USPS is assessing whether additional information will be required. The HS code is not currently required by the USPS. HS codes are internationally recognized codes for the identification of items at customs. They can be found in the 2022 Schedule B on the Census Bureau website at https://www.census. gov/foreign-trade/schedules/b/index.html.
USPS is working with an outside contractor to develop a delivery duty paid (DDP) customs clearance solution for postal goods. The USPS Outbound Commercial Provider Initiative (OCPI) will provide commercial delivery that does not use the current postal network for packages and any other items requiring a customs form. The OCPI has narrowed since it was conceived to provide a network in 2019, when the US was possibly leaving the UPU. It can apply to Priority Mail Express International (PMEI), Priority Mail International (PMI), or First-Class Package International to designated countries. For any particular designated country, OCPI may apply to one, two, or all three products. The initial number of country-product combinations is likely to be small. The start date has once again been delayed from September 25, 2022, to early post-peak 2023. USPS has said it will provide a 90-day notice of the program’s start and 30-day notice of changes (additions or removals) of product-country combinations to the OCPI list, although the notification times may change. As currently planned, notice will be through the
Postal Bulletin and PostalPro. OCPI items will require new customs forms (2976-E or 2976-ES depending on the package), a commercial invoice (PS 6183 or Lab 6183), and OCPI Presort Dropship Tags. The customs form will need prior certification by Export Compliance. Final form specifications are not yet available. In addition to new forms, the HS tariff number is required “if available.” Since HS codes are currently required on commercial shipments to other countries, it is possible that OCPI mail without them will be rejected. The USPS is working with an outside contractor to develop a delivery duty paid (DDP) customs clearance solution for postal goods. Traditionally, postal customs clearance has been delivery duty unpaid (DDU), which leaves the payment of any duty on the recipient. With a DDP solution, duty can be paid by the seller or mailer of the goods. Commercial, as opposed to postal, customs clearance can allow for payment of duty by the sender or an agent, avoiding a possible unanticipated cost to the recipient. A timeline for this project and details of how it might work are not yet available, but a DDP solution should remove returns due to non-payment of customs duty by recipients.
Merry Law, President of WorldVu LLC, consults with organizations on international addressing and databases as well as on postal and delivery issues. She is editor of the authoritative Guide to Worldwide Postal-Code and Address Formats and author of Best Practices for International Mailings. She frequently writes and speaks on international addressing and mailing, bringing the understanding of an international mailer of letters and packages and a consultant to other mailers. Merry is a member of the U.S. International Postal and Delivery Services Federal Advisory Committee and the USPS Mailers Technical Advisory Committee (MTAC) and participates with the Universal Postal Union Addressing Work Group associations.
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 9
INTERNATIONAL RULES & REGULATIONS DON’T HAVE TO BE AN OBSTACLE BY SHAWN LEVSEN
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t’s inevitable. E-commerce companies can’t limit themselves to domestic sales forever. International demand is growing. Ninety-five percent of the world’s market is outside the US. A simple look at one of the website analytics tools (e.g., Similarweb, Google Analytics) will likely show visits from international buyers to your website. I’ve worked with companies claiming they don’t have any interest from international buyers only to find that 40% of their web traffic is coming from foreign IP addresses. Many companies aren’t logistically prepared to serve the international customer pool and simply refuse those orders. Others have decided to give it a chance, ship without any preparation,
experience failure, and give up. The tools and expertise are now available to support international e-commerce, and it’s becoming more and more common for online sellers to successfully balance a positive customer experience while still complying with international regulations. There are two aspects companies should address to achieve that success. The first is to manage costing mechanisms. The second is to ensure they meet regulatory requirements. MANAGING INTERNATIONAL COSTING MECHANISMS Everyone is aware that international transportation is expensive. It’s difficult to sell a $20 item and then quote $40 for shipping, and even then, that basic
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transportation cost doesn’t include other fees. Too many times, online sellers ignore those additional fees that make up the total cost to deliver, or “landed cost.” If a seller ships with those additional fees as the responsibility of the buyer, then those additional costs must be clarified on the website. A typical VAT charge in Europe adds 20% to the cost. An added carrier administrative fee could be another $20. With various fees, that cost can become substantial. Many small online sellers have been forced to pay for returns or abandon shipments altogether because the buyer was presented with an unexpected cash on delivery (COD) charge and then refused the shipment. Retail buyers, like many small online sellers, just don’t
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anticipate the expense of international shipping. A seller might take responsibility for those costs in an effort to boost international sales. That’s good for customer service but the seller could easily end up losing money on those orders. A company that I worked with was quoting international buyers $200 in delivery costs, but we found that they were actually paying $1,200. Sales numbers were wonderful, but at the expense of the shipping department. The two departments didn’t communicate and reconcile total order cost. MEETING REGULATORY REQUIREMENTS Regulation of exports begins before a shipment has even left the US. For various reasons, the US government will prohibit sales to specific individuals, entities, or countries. This isn’t just for companies shipping weaponry or encryption. Foreign businesses, schools, and individuals appear on a Consolidated Screening List issued by the US government. There are also a few countries that are embargoed. An attempt to ship to one of those entities is illegal and fines are large. Another consideration before an order even enters a foreign country is local law. Retail buyers will sometimes order materials knowing they aren’t allowed in the country. Countries will prohibit imports on the basis of religion, safety, local compliance, import licenses, or health standards, among other reasons. I recently worked with a company trying to get nutraceuticals into the EU. Sales in the US were very straightforward, but the EU had a different approach and disallowed them. If a product makes it to the destination country, the importer of record (IOR) is legally responsible for the import. In the case of the nutraceuticals example above, customs might want to know the creatin content of the product. In a retail sale, that would be the end-user who has the responsibility as the IOR. Those retail buyers are likely incapable of answering those specific customs-related questions.
When a shipment gets rejected or the seller wants to return the order, the seller must now manage international returns. Not only is it more expensive to have the return shipped back, but sellers must also determine what to do about any duties and taxes that were paid on the original order. Those earlier fees could go unrecouped even though the sale was incomplete.
I’ve seen too many companies have frustrating international sales experiences when solutions could have been easily found. Thankfully there are solutions to all the issues above, although they require thorough planning. When it comes to responsibility for cost, I’ve mentioned that communication is key. It’s always best to ensure customers are clearly informed on the website of what fees they’ll be paying. It’s not uncommon for a seller to now provide calculators for landed cost and have the buyer pay those up front. That improves customer satisfaction and lowers the rejection rate. In-house developers can use various APIs to create those tools, or there are a number of vendors that offer tools for landed-cost quoting (e.g., Zonos or Borderfree). An online seller might find it advantageous to create an entity to serve as an IOR if they receive sufficient orders from a particular country or customs territory such as the EU. This shields the buyer from visibility to any of the customs issues. The buyer simply becomes the receiver of a parcel. Becoming an IOR can be done by opening a physical presence in the destination market,
contracting with a local fiscal representative, or in some cases opening a virtual, non-resident importer entity. Taking the IOR route is a large commitment but does eliminate many of the customer-facing problems created with online international retail sales. Information on these topics is becoming more and more accessible. Publications such as this one and events such as the recent PARCEL Forum can provide tips. The US government offers local assistance through the US DOC Commercial Service. There are also District Export Councils, state trade offices, and Small Business Development Centers that are all prepared to help. The carriers and brokers a company is already paying are also positioned to provide support. These service providers all have specialists in online transactions. The first crucial step a company can take is to come up with an international plan. They shouldn’t wait until they have a number of international failures, but rather develop policies and a programmatic approach before embarking on selling internationally. Those plans should be developed at a high level of expertise. I’ve seen companies lose several hundred thousand dollars allowing shipping clerks with little experience to make these decisions. However, it’s crucial that the planning includes the clerks that will be doing the actual work, as I’ve seen great plans never make it down to the shipping department. Moreover, those plans should be documented and updated regularly as people and regulations change. I’ve seen too many companies have frustrating international sales experiences when solutions could have been easily found. Be knowledgeable, determine how engaged you want to be, and ensure everyone knows their responsibility.
Shawn Levsen is a customs broker with over 20 years in global supply chain sales and Chair of the National Association of District Export Councils.
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 11
BY JOHANNES PANZER
I
5
WAYS TECH CAN HELP MEDIOCRE HOME DELIVERY PERFORMANCE
f every retailer’s goal is to delight customers, it’s not happening in home delivery. In mid-January 2022, a study of 8,000 consumers in Europe and North America and their perception of online buying and home delivery showed that, while consumers are buying more, they’re not thrilled with today’s inconsistent delivery performance. What’s more, a significant number are ready to punish poor performing retailers. While there are challenges to improving home delivery performance, retailers who accept lower standards of service quality could experience top- and bottom-line hits as consumers turn to others who find ways to up their delivery game.
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Figure 1
Figure 1: Home Delivery Consumer Sentiment by Country
SUBSCRIBE FOR FREE! Arrived much later than expected Delivery came at a different time than was expected Delivery time offered was longer than I was happy with Products out of stock when ordered Package was damaged Package was left in an in-secure location Delivery didn’t arrive at all Difficulties contacting customer service over a problem Driver couldn’t find my location and didn’t make ... Delivery was incorrect Delivery slots offered lacked flexibility Had to pay a hidden fee on delivery to take my purchase Neither the retailer nor the delivery company took... Other I’ve not had any negative experiences with a delivery...
26% 22% 22% 20% 20%
}
Top 5 Issues
18% 16% 14% 12% 12% 11% 7% 7% 1% 27%
Figure 2: Delivery Problems Experienced by Consumers [Oct.-Dec. 2021]
HOW BAD IS IT — AND WHAT’S THE IMPACT ON RETAILERS? The survey found that, over the October-December holiday period in 2021, 73% of the total respondents surveyed had a delivery problem. Here’s the breakdown by country: When asked to cite the nature of the problem, responses primarily fell into one of five main categories (see Figure 2). This very uneven delivery performance demonstrates that many retailers have yet to make meaningful inroads in this important part of the overall customer experience.
While the scope of the delivery problem should be a wake-up call for retailers, what’s perhaps even more compelling is what customers are doing about it. According to the survey, poor delivery prevented 23% of these consumers from buying from the retailer again. Consumer frustration can quickly translate into negative effects for the retailer: consumers lose trust in the retailer and/or delivery company, they may not order from the retailer again, they may tell friends and family to also steer clear — and the potential for individuals to
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 13
negatively influence many more people through social media make the consequences of poor delivery more damaging. HOW CAN B2C E-COMMERCE TECH IMPROVE HOME DELIVERY AND MAKE CUSTOMERS HAPPIER? If we examine the top five problems with delivery as cited in Figure 2, the good news is that there’s a big opportunity for retailers to create a much more positive delivery outcome for consumers. With the help of technology built specifically for business-to-consumer (B2C) e-commerce, each of these issues can be solved up front, prior to any customer engagement, resulting not only in happier customers when there is an order but in higher margins for the retailer as well. Additionally, happier customers correlate to higher ratings and more recommendations — table stakes for e-commerce success today.
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Packages arriving much later than expected (26%): E-commerce companies often don’t have an automatic way to effectively prioritize orders for delivery. With oftentimes hundreds or thousands of orders that need to be processed, the complexities can quickly overwhelm paper-based practices and translate into late deliveries. Order prioritization is one area where technology can help: it can automatically take into account product types, delivery date, and/or time windows, delivery countries, sales channel requirements (e.g., Amazon Prime), carrier requirements, and rates to intelligently prioritize and effectively organize shipments for delivery. Another area where paper bogs down fulfillment is in the warehouse, if retailers are still relying on printed pick tickets or delivery lists. These are typically handed out to warehouse teams who start collecting items from bins/racks/etc. without any technology-based guidance on a) walking the warehouse using the shortest path possible and b) picking accurately. In many cases, companies may try to find efficiencies by tackling fulfillment in batches: for example, 40 orders, 40 pick tickets, 40 shipping labels — all that paper needs to be manually sorted and managed on a batch-by-batch basis. Technology eliminates these types of highly time-consuming tasks, which are also prone to disruption and error, exacerbating already slow fulfillment practices and contributing to late deliveries. Deliveries coming at a different time than expected (22%): As with late deliveries, deliveries arriving unpredictably underscores consumer frustration with delivery reliability. Without technology-driven delivery workflows, it can easily happen that retailers start processing and shipping orders but the date and time window for delivery is misaligned with the delivery promise made to the customer. Communication is another important part of the reliability equation. With technology, retailers have the means to proactively inform customers when their original expectation
2
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cannot be met, and to reset expectations as required. During the delivery process, technology can automatically calculate ETA changes and notification engines use data from delivery appointment through physical delivery to keep customers informed, minimize failed deliveries, and allow customers to rate their experience. Customers are likely to be more forgiving when retailers take ownership of communicating delivery changes.
Using B2C e-commerce technology, startups to global brands can greatly improve their control over the most common delivery problems that are frustrating consumers today.
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Delivery window offered was too long/too inconvenient (22%): While buying personas are well understood by retailers, it’s critical to understand that delivery personas also exist and that customers want choice in how their orders are delivered. Not every customer wants the fastest delivery, while many will pay a premium for a convenient time window. Success begins at the point of sale — with help from technology for dynamic delivery appointment scheduling. With these capabilities, retailers can present consumers with multiple delivery options simultaneously during the buying process and allow them to self-select their preferred choice. The technology can also make complex multimodal delivery decisions during the buying process, orchestrating and planning deliveries for the optimal mode. For example, a combination of fleet and gig economy delivery can be used to maximize the value of the fleet to deliver larger orders and gig economy drivers for smaller orders or deliveries to less dense geographies. Dynamic delivery appointment scheduling also eliminates unscheduled or infeasible deliveries because consumers are only presented with viable options. Products that are out of stock when ordered (20%): It’s an attention-getting number: one-fifth of consumers surveyed experienced the disappointment of learning, after successfully placing an order, that the item was out-of-stock/oversold. The sale is lost, the customer is dissatisfied and it’s a lot of extra work for the retailer to inform customers. Technology can help eliminate this problem in two ways. One, it can massively help keep inventory in sync with sales channels with bidirectional, virtually real-time integration between warehouse inventory
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levels and e-commerce platforms and listing tools that serve different marketplaces. Two, barcode scanning technology ensures inventory accuracy — beginning with receiving when items first enter the warehouse. This is a critical step. Retailers need to be certain that quantities are correct, barcodes are on each item, barcodes are correct, etc. before goods are physically put into stock and made available for sale. If inventory accuracy is weak early on, retailers often “find” inventory later, in some cases even years later, and have to write it off. With barcode scanning and technology integrations, oversells/out of stocks are easily eliminated and delivery promises kept. Package was damaged (20%): Damaged packaging is another challenge that technology can help retailers address. While some goods, like apparel, are easily handled in polybags, other goods like jewelry and watches or some types of home décor need to be packaged with an extra level of care. Technology can give guidance at the packing station and automate packaging execution for goods that need special handling, whether that’s a certain type of box, a specific size of box, the type of packaging inside the box, or even the shipping service or carrier required for delivery. This is where technology for warehouse management execution can be integrated seamlessly with parcel/LTL shipping solutions. It’s certainly possible to make packaging decisions manually on the fly; however, this is only practical up to a certain level of order volume, after which technology is the best bet to ensure goods are packed efficiently and arrive safely and in their intended condition.
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One stop shop solution for customs and logistics in Mexico and USA. • Ecommerce • Import & Export • Cargo Service • IT Solutions
REMEMBER, THE LAST MILE IS THE LAST WORD The breadth of home delivery performance failures is clearly an area of opportunity for many retailers and their delivery services partners. The impact of delivery problems is not trivial and is likely more detrimental than many retailers realize. Using B2C e-commerce technology, startups to global brands can greatly improve their control over the most common delivery problems that are frustrating consumers today. Technology is certainly an investment but optimizing delivery performance is an investment in elevating the customer experience, reducing warehouse and shipping costs, and driving ecommerce business growth.
Johannes Panzer is Head of Industry Solutions for Ecommerce at Descartes. With over 15 years of experience in ecommerce, Johannes is known as a domain expert in ecommerce fulfillment and logistics. He plays a central role in developing the go-to-market strategy and positioning for Descartes’ ecommerce solutions globally. Johannes has a background in marketing and is experienced in agile project management with several years leading the Descartes product management group in Germany.
contacto@hound-express.com +1 95 6568 3443 www.hound-express.com
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 15
By Thomas Andersen
INTERNATIONAL SHIPPING: NEGOTIATING OPTIMAL TERMS
W
ith the world becoming smaller, shipping internationally should be easy… right? Conceptually, yes, but to do so profitably, effectively, and continuously can be challenging. Between a variety of service options at multiple and changing price-points, due to annual rate increases and the ongoing introduction of new fees and surcharges, developing a sustainable international shipping process can be demanding and overwhelming. SERVICE VARIANCES Negotiating and analyzing international pricing between the three global carriers (UPS, FedEx, and DHL) is quite different than the domestic aspects of the carrier agreement. For one, services are not the same between carriers. Contrary to the traditional Zone 2-8 structure for domestic, which is consistently mileage-based, international lanes don’t fully align between carriers, so paying attention to which countries fit within the relevant lanes is a necessity. For example, FedEx typically offers two or four express options based on destination country for export shipments from the US, while offering three or four options for most import lanes to the US. Services include International First, International Priority Express, International Priority, and International Economy. UPS will offer up to four
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express parcel services, depending on the destination country. Those options include Worldwide Express Plus, Worldwide Express, Worldwide Saver, and Worldwide Expedited. DHL limits their options to three export services with a single import service. DHL Express Worldwide service is offered to and from the US for 220 countries, DHL Express 12:00pm is delivered from the US to 155 countries, and DHL Express 9:00am is to 85 countries. Each carrier’s services come with different committed transit times, as well as available options, based on origin and destination country. Including pricing with consistent discounts for all service options is recommended to avoid inadvertently using a service without discounts or with higher rates for an inferior service. To complicate matters further, while export and import shipments are billed in pounds (LBS) with FedEx and UPS, import is billed in KGS (1/2 KG increments) with DHL Express (export is billed in LBS). All services should also be addressed, including letter, pak, packages, and air freight. Eliminating any gaps limits one’s exposure and should require little effort on your carrier’s part to address those gaps. For international ground services, the base rate will be substantially lower, as will the negotiable discount levels. Note that letter/documents can benefit from lower pricing than non-document, so utilize the appropriate service
based on commodity shipped and packaging. More than ever, shippers are being punished for taking up unnecessary space. Pricing concessions can also be made for non-door to door shipments, so assessing these needs can be beneficial. CONTRACT DETAILS It’s important to ensure that the details within the carrier agreement are buttoned up. Minimum charges are often overlooked with discounts that are far less than the stated overall discounts. A 40% discount vs. 70% could lead to a cost that’s twice the amount (40% off $100 = $60 vs. 70% off $100 = $30). Accessorial charges for international shipments are often substantially higher than for domestic shipments. For example, charges for remote deliveries (Extended Area Surcharges) can cost $45 and up for international shipments versus domestic Delivery Area Surcharges, which range from $3.40 to $6.50. More recently, peak/demand surcharges have had a significant impact on the total costs. These will apply to packages shipped during the specified peak/demand periods for many origins, destinations, and service levels in an amount set forth based on date of shipping. These fees will apply in addition to most other applicable charges. Shippers should consider these charges prior to tendering shipments to either FedEx, UPS, or DHL. Combined with higher fuel surcharge percentages for international shipments, often ranging from five to 10% percent higher than domestic services, margins can quickly dissipate. Most fees are applicable to specific domestic and international services, so negotiating these exact terms is a necessity. This should be continuously evaluated and reviewed, since any new fees that are introduced are applicable, unless specifically addressed in the carrier agreement. OPERATIONAL INFLUENCES There are other aspects to international shipping that should be considered and may influence what should be negotiated in one’s agreement. First, customs clearance options should be considered upfront. For e-commerce shipments, consider DDP (Delivered Duty Paid), where duties and taxes are paid in advance. The seller is then responsible for paying duties and taxes upfront, which minimizes rejected packages upon receipt due to unforeseen duties and taxes. These costs should be made transparent at checkout, so the customer decides proactively to complete the transaction. Meanwhile, DDU (Delivered Duty Unpaid) is often sufficient for B2B transactions. If shipping e-commerce, consider services that transition to a local carrier for final delivery vs. choosing doorto-door services. Most agreements contain pricing for express services where the carrier manages the entirety of the shipping process. Each global carrier also offers more cost-effective international services where the local post office or courier manages the delivery aspect of the process. These options should be evaluated based on expectations of the recipient, time-in-transit requirements, value of the commodity, tracking requirements, and other factors. The carriers have all developed (in some cases, purchased) technology that integrates with various platforms to improve the international shipping process. This includes the ability to shop your website using local currency and calculating
accurate shipping costs, as well as duties and taxes on the front end, thus minimizing and even eliminating rejected packages upon receipt. An abandoned cart is much more cost-efficient than an abandoned delivery. For non-US involved shipments, consider having the origin or destination country’s carrier pricing group provide an agreement and pricing. This eliminates currency fluctuation (risk) and the need for multiple countries to make a profit (eliminate the middleman). If priced in the US, the US finance team would like their share of profit, as one may imagine. If specific countries are the most common origin or destination, focus on separating out those specific markets from lanes that may include other countries. It is pertinent to review each carrier’s service guide prior to negotiating your contract. International shipping continues to evolve, with new service offerings and new charges being introduced. Explore the economic conditions and consider capacity constraints or opportunities between certain lanes prior to engaging in these negotiations. It’s often encouraged to have a non-incumbent carrier provide an offer before engaging with your current carrier(s), as this may provide leverage with the pricing, as well as gaining a better understanding of the shipping environment.
Thomas Andersen is Partner/EVP of Supply Chain Services for LJM Group. CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 17
BY BRENT WM. PRIMUS, J.D.
PARCEL COUNSEL SPECIAL EDITION: LOSS & DAMAGE TO CARGO IN INTERNATIONAL SHIPMENTS
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he starting point in understanding international cargo claims is that a claim is based upon a breach of contract by the carrier, not whether the carrier was negligent. This arises out of the fact that the essence of the transportation contract is that the carrier agrees to move cargo from point A to point B. In return, the shipper agrees to pay the carrier. Implicit in this arrangement is that the cargo will arrive at destination undamaged. When the cargo is lost or damaged, the basic contract for carriage has been breached, giving rise to the shipper’s claim. The contract for carriage can either be an individually negotiated contract between the shipper and the carrier; or, if none, the bill of lading, air bill, ocean bill, or other document issued by the carrier. These bills will typically incorporate by reference the terms of the carrier’s tariff or other terms and conditions. BASICS OF MOTOR CARRIER LIABILITY For domestic ground shipments, the governing statute is called the Carmack Amendment. This statute imposes mone-
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tary liability for the actual loss. However, carriers are allowed to limit this liability in exchange for a lower rate, and most do. Carmack also sets a minimum time period of nine months from the date of delivery for filing a claim and a minimum time period of two years from the date the claim is denied for initiating lawsuits. SHIPMENTS BETWEEN THE UNITED STATES AND CANADA An underlying principle relating to cargo liability for ground shipments moving between the United States and Canada is that the law of the country of origin applies. Thus, for northbound shipments from the United States into Canada, Carmack liability will apply; for southbound shipments, Canadian law will apply. In Canada, there is no federal law governing loss & damage. Rather, there is something known as the Uniform Bill of Lading Act (UBLA), which has been adopted by some, but not all, of the provinces. These provinces include Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, and Saskatchewan.
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Pursuant to the UBLA, carriers are liable for any loss of or damage to the goods while they are in the custody of the carrier, subject to certain exceptions. Generally speaking, the Canadian carriers are not liable for delay “unless by agreement that is specifically endorsed in the contract of carriage and signed by the parties.” Although the basic principles of liability are very similar to those of the United States, a crucial distinction relates to the amount of the liability. As stated above, under Carmack the starting point is “actual loss or injury.” However, in Canada, the UBLA provides that the liability: “Shall be the lesser of (i) the value of the goods at the place and time of shipment, including the freight and other charges if paid, and (ii) $4.41 per kilogram computed on the total weight of the shipment.” However, the consignor can declare a value on the bill of lading higher than the UBLA minimum. Another very critical distinction relates to much shorter time limits. Notices of claims are to be given “within 60 days after delivery of the goods or, in the case of failure to make delivery, within nine months after the date of shipment.” The “final statement of the claim must be filed within nine months after the date of shipment, together with a copy of the paid freight bill.” SHIPMENTS BETWEEN THE UNITED STATES AND MEXICO The principle that the law of the country of origin will govern a transborder shipment also applies to shipments between the United States and Mexico. The Mexican federal law governing carrier liability provides that when the user of the service does not declare the value of the goods, liability will be limited to an amount equivalent to 15 days of the minimum daily wage then current in the Federal District per ton. At the current exchange rate, this is approximately 6¢ per pound. This is drastically lower than in the United States or Canada. Because of this, the best practice is for shippers to obtain their own shipper’s interest cargo insurance to protect their interests. There is also a critical operational difference between Canadian cross-border shipments and Mexican cross-border shipments. Generally speaking, US-based carriers will pick up in the United States and deliver to Canada, and Canadian carriers will pick up in Canada and deliver to the United States. However, for a multitude of reasons, US carriers picking up in the United States usually will only carry the cargo to the Mexican border where it is then turned over to a Mexican carrier to deliver to destination. The opposite applies with respect to northbound shipments, with Mexican carriers only transporting cargo to the United States border. Because US carriers so rarely cross into Mexico to deliver to destination, Carmack liability will hardly ever apply to the portion of the transport in Mexico. This underscores the need for shippers to obtain their own cargo insurance for loss & damage occurring in Mexico.
INTERNATIONAL AIR CARGO LIABILITY For domestic air shipments, the air carrier’s tariff sets the time limits and limits of liability. For international air shipments, the Montreal Convention, an international treaty, sets the time limits and limits of liability. A claim must be filed within 14 days of delivery for damage and within 21 days for delay. The statute of limitations for filing a lawsuit is two years. Under the Convention, the limit of liability is 22 Standard Drawing Rights (SDRs) per kilo, which currently translates to approximately $12.90 per pound. OCEAN CARGO LIABILITY While individual small packages are not transported by ocean carriers, many parcel shippers import their inventory from overseas or export their product. Rather than small individual packages, these will typically be shipped in intermodal containers. Ocean shipments to and from the United States are usually governed by the Carriage of Goods by Sea Act (COGSA). Under COGSA, an ocean carrier has 17 defenses. As with Carmack, even when the facts establish such a defense, the carrier must also show that its negligence did not contribute to the loss. For ocean shipments, the timeline to file a notice of claim is only three days from delivery — much shorter than the nine months allowed under Carmack. Similarly, the timeline to file suit is one year from the date of delivery — as opposed to two years from the date of declination of a claim under Carmack. Originally, COGSA was understood to apply tackle-to-tackle, meaning from the time that loading the shipment began to the completion of unloading the shipment. However, over time, the ocean carriers have been allowed to extend the COGSA liability regime to the inland portion of the movement by a motor or rail carrier. Another significant difference between COGSA and Carmack is that whereas Carmack imposes liability for the actual loss, the liability of an ocean carrier under COGSA is limited to $500 per package or customary shipping unit. It’s for this reason that most shippers obtain shippers’ interest cargo insurance for ocean movements rather than to rely on the liability of the carrier CAVEAT The above discussion of the legal principles relating to loss & damage to cargo when moving internationally is a short summary of a very complex area. There are other principles and other laws and regulations that could well come into play with regard to any particular situation.
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on PARCELindustry.com. Your questions are welcome at brent@primuslawoffice.com. CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 19
BY ANDREW M. DANAS
WHAT TO KNOW WHEN WORKING WITH CUSTOMS BROKERS
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any parcel shippers find that using a licensed customs broker is essential when making international shipments, since every cross-border shipment is both an import and export transaction involving two different governments. Many parcel shippers, especially those just venturing into international trade, may also engage the services of a customs broker without a full understanding of the legal role of the customs broker and the parcel shipper’s legal obligations to the government as the party actually responsible for the import or export transaction. Customs brokers are licensed by US Customs and Border Protection (CBP) to transact “customs business” on behalf of others (19 U.S.C. §1641). Their licensing and performance of services are subject to CBP regulation (19 CFR Part 111). A licensed customs broker can provide advice on what documents are required to clear merchandise through
customs; how to determine the country of origin and the proper classification of the merchandise under the Harmonized Tariff System (HTS); and how to calculate the valuation and amount of taxes and duties owed on the import. They can advise on other laws and regulations that may apply to the importation and exportation of the shippers’ goods. They can also assist in the preparation and filing of required documents and engage in communications with government agencies on behalf of their client as the entry is processed. However, the fact that the customs broker can and does provide such advice and services does not mean that using a customs broker is an alternative to the parcel shipper’s own legal obligations to know and comply with the laws governing its international shipment. Understanding the legal framework that governs both the importer and the customs broker is essential to effectively working with a customs broker. US import-export regulations set the legal framework for the relationship, but the relationship will
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also usually be supplemented by the contractual terms and conditions that customs brokers frequently include in their Power of Attorney (POA). US customs law is based on a shared responsibility regulatory compliance system imposing a duty of “Reasonable Care” upon the importer, 19 U.S.C. §1484, combined with an obligation of CBP to provide information to the trade community to assist importers in complying with the laws. “Reasonable Care,” combined with “Informed Compliance,” imposes on the importer of record a legal obligation to file an entry of merchandise with accurate information to determine its classification and the amount of duties, taxes, and fees to be paid by the importer and to thus allow Customs to admit and release the merchandise into the United States. While consulting with a customs broker may be one factor that Customs will consider in determining whether an importer has exercised reasonable care, it is not the only factor.
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The power of attorney that all customs brokers are required to obtain from the party on whose behalf they transact customs business underlines the fact that using the services of a customs broker does not relieve the importer of its legal obligations. The POA appoints the customs broker as the legal agent of its principal, the importer. While CBP has suggested POA forms, their use is not mandatory provided that the power of attorney satisfies CBP’s requirements. A POA does not necessarily create a contract. However, in addition to transacting customs business, many customs brokers also provide other services to their customers, for example, preparing and filing export documentation and arranging for forwarding and logistics services. Providing these services also frequently requires a power of attorney subject to the regulations of such agencies as the Bureau of Census. Industry trade associations have thus developed model POA standard contractual terms and conditions regarding the range of services that a customs broker may provide. Customs brokers frequently use variations of these terms and conditions when entered into POAs with their customers. As with any contractual relationship, a customs broker’s power of attorney and incorporated terms and conditions should always be read and understood by the parcel shipper before being signed. While they vary from broker to broker, customs brokers’ POAs will frequently have provisions stating that the broker is only acting as the customer’s agent; that the broker is relying on the accuracy of the information provided by the customer; and that the customer will review the accuracy of all documents prepared or filed with government agencies on its behalf and advise if there are errors. Customs brokers frequently require their customers to indemnify and hold harmless the broker from any liability, including fines, penalties, and attorney’s fees, arising from the exportation or importation of the importer’s merchandise, including liability arising from the
inaccuracy of documents or information furnished by the customer to the broker. In addition to limiting both the time and place for lawsuits, customs brokers’ terms and conditions frequently contain provisions that limit the broker’s liability to negligent acts and, frequently, to a set dollar amount. While CBP imposes regulatory obligations upon both customs brokers and importers for maintaining records, many broker POA terms and conditions have specific disclaimers that the broker will not maintain such records as an agent for the customer, frequently citing the requirements under US law that the importer has the obligation to maintain records of its transactions.
One service that many customs brokers provide for their clients is advancing or facilitating the payment of customs duties, as an agent, on behalf of their client. Parcel shippers should be aware that in providing services that are not within the scope of the customs broker’s license the customs broker may also be required to have additional government licenses, for example, an ocean freight forwarder’s license or a registration as a motor carrier property broker. In addition, depending on the nature of the services and the licenses and regulations under which they are being provided, the referral and subcontracting relationships between customs brokers and other companies may be subject to regulations of agencies such as the CBP, the US Census Bureau, the Federal Maritime Commission, and
other government agencies that govern the permissible scope of the relationships and required disclosures to the customer. One service that many customs brokers provide for their clients is advancing or facilitating the payment of customs duties, as an agent, on behalf of their client. CBP regulations require that all broker POAs have a written notification to their customers that the fact that an importer of record has paid its customs broker the duties, taxes, or other debts owed to Customs on an import does not relieve the importer of its liability if the broker fails to pay the charges (19 CFR §111.29(b)(1)). There are many reasons for this regulation, but for parcel shippers relying on the services of customs brokers it is a reminder that the buck usually stops with the customer, not the broker it has hired. Although there is no legal requirement that an importer of record use their services, customs brokers frequently have an expertise and depth of knowledge and experience that cannot be easily duplicated by small- and medium-sized companies that ship merchandise internationally. Customs brokers are thus crucial and valuable partners in many international transactions. Parcel shippers who understand the basic rules and roles that both customs brokers and their customers have in any international transaction — and the fact that their customs broker may wear many regulatory hats in providing services — will usually find that their working relationships with customs brokers are both more efficient and beneficial to all parties in the import or export of their merchandise.
Andrew M. Danas is Partner, Grove, Jaskiewicz and Cobert, LLP, Washington, D.C. Visit www.gjcobert.com or email adanas@ danaslaw.com for more information. The information contained in this article is intended to be general background information. It does not constitute and should not be relied upon as legal advice. Readers should contact a qualified attorney should they have a specific legal question.
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9 WAYS TO IMPROVE YOUR CROSS-BORDER AND GLOBAL PARCEL SHIPPING A recent survey showed 50% of our subscribers are actively looking into how focusing more on international shipping can improve their businesses’ bottom line. If your 2023 plans include adding or improving your cross-border and global parcel shipping, take a look at the following 9 companies and their solutions and services that will help with your plans.
Alexandretta Transportation Consulting specializes in reducing small parcel rates and optimizing parcel agreements in Europe, Canada, Asia, and the United States. Whether negotiating agreements for international shipments coming into and out of the US or negotiating agreements in an entirely different geographic region, Alexandretta brings the skills and knowledge that drive cost savings. Our understanding of offshore markets dynamics and carriers also allows us to guide clients on when to negotiate by region and when to pull multiple regions together. We take the complexity out of shipping and deliver the transportation advantage. www.alexandrettaconsulting.com | info@alexandrettaconsulting.com | 714.777.3377
Take a specialist approach to shipping. Labeling and document handling is often the weakest link in the dispatch process. Caljan Print & Apply systems can label almost any type of shipment, regardless of packaging and height. Applied at specific X, Y, Z coordinates, the label can even cover redundant bar codes. The most cost-effective carrier is selected automatically, based on package weight, dimensions and destination. Our document handling systems insert consumer paperwork automatically into the package, or into a document pouch on the exterior of the package — for international consignments. Leave the whole project to Caljan — throughput guaranteed. info.us@caljan.com | 800.338.1751
E2open’s multi-carrier Global Parcel solution helps retailers optimize parcel shipping, across the country, and around the world. The solution includes embedded analytics that help retailers manage growing complexity and volumes, continuously balancing delivery performance and price tags across multiple carriers. Our cloud-based platform lets shippers expand their networks to streamline last-mile delivery and put products in their customers’ hands more quickly than standard shipping and delivery services. Global Parcel is part of the e2open Logistics Suite for global transportation visibility, planning, and orchestration across all modes, around the world. | www.e2open.com | 866.432.6736
ePost Global will solve your e-commerce shipping needs. With one of the largest global networks of final-mile carriers, processing facilities across the US, and over 850 years of international logistics experience, there is no shipping challenge that ePost cannot solve. Through proprietary technology and custom designed automation equipment, we can operate 24 x 7 and handle high volumes during any season. Each processing facility has dedicated customer support teams ready to answer questions and ensure our customers consistent, reliable service. For e-commerce deliveries, ePost Global can help reach new markets and simplify international shipping. Contact us today! | https://epostglobalshipping.com | inquiries@epostglobalshipping.com | 866.784.8444 22 PARCELindustry.com CROSS-BORDER JANUARY-FEBRUARY & GLOBAL 2022 2022
FirstMile simplifies international shipping for e-commerce clients across the globe with one interface, one invoice, and one consolidated pickup. Whether you are looking for a low-cost mail solution to maximize profits or a parcel option with door-to-door in-country tracking to maximize service, we can help. Xparcel is our unique shipping platform that shops regional and national carriers for the best combination of price and service on every single rate call. FirstMile provides complete e-commerce shipping solutions for fulfillment networks and direct-to-consumer shippers globally. Whether you are shipping 50 or 50,000 shipments a day, optimize 100% of your volume with FirstMile. www.firstmile.com | sales@firstmile.com | 888.993.8594
GEODIS MyParcel is a D2C cross-border small parcel shipping service from the US to 26 European continental countries, the UK, and Canada. GEODIS is a leading global logistics provider acknowledged for its expertise across all aspects of the supply chain. As a growth partner to its clients, GEODIS specializes in five lines of business: Supply Chain Optimization, Freight Forwarding, Contract Logistics, Distribution & Express, and Road Transport. With a global network spanning nearly 170 countries and more than 44,000 employees, GEODIS is ranked no. 7 in its sector across the world. In 2021, GEODIS generated €10.9 billion in revenue. | geodismyparcel.com | michelle.johnson1@geodis.com | 866.443.6347
GlobalPost offers a range of shipping solutions that simplify international parcel shipping while saving you money. By combining our world-class customer service, easy-to-use technology, and seamless integrations with the world’s top shipping platforms, we help e-commerce and warehouse sellers succeed around the world. GlobalPost ships to over 220 countries and has a network of last-mile carriers that allows us to optimize delivery times. Our partnerships with global postal carriers and our software-based network allow flexibility, ensuring you get the best service at the lowest rates with every shipment. Contact us today for a free consultation. | www.goglobalpost.com | info@goglobalpost.com | 888.899.1255
We are well known for our fast and precise process of customs clearance. We have operations by air in Mexico´s City International Airport and Guadalajara’s International Airport, or by land in Laredo, Texas. Currently, we process more than 3 million e-parcels per month. We have a proven capacity to help you expand your business to Mexico within weeks. www.hound-express.com | contacto@hound-express.com | 956.568.3443
OnTrac International utilizes an extensive network of last-mile carriers to arrange mail and parcel delivery to over 200 countries and territories. Customers benefit from more economical mail processing, pre-negotiated shipping discounts, and the expertise of a team of professionals who understand the latest in international delivery — that means more savings, more sales, and satisfied customers. OnTrac International is a USPS Postal Qualified Wholesaler, is SOC 2 compliant, and the company can support integration with over a dozen different multi-carrier software providers. The OnTrac Logistics Network includes three divisions based on service offerings: overnight, messenger, and international. For more information about OnTrac International, visit ontracinternational.com or call 800.628.4868. www.LaserShip.com | www.OnTrac.com | www.OnTracInternational.com CROSS-BORDER JANUARY-FEBRUARY & GLOBAL 2022 PARCELindustry.com 23
Global consumers value speed over cost 67% of global consumers buy for lower prices 10% of all cross-border sales are shipped via an express service Cart values will go up 70% on international orders Cross-border orders have half the return rate as domestic orders 68% of millennials would choose a retailer based solely on their returns policy
INTERNATIONAL EXPRESS SERVICE: YOUR COMPETITIVE ADVANTAGE?
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By Michael J. Ryan
he world is truly getting smaller. As a global consumer, you can buy anything from anywhere, at any time, and at a price that is competitive. If you’re on the shipping side of things, it’s critical to explore how an international express service option can help your global sales explode. But first, here are some key facts about cross-border e-commerce sales: Retailers who offer premium shipping services grow 60% faster than those that don’t. Cross-border orders are growing 25% per year
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There are many options to ship parcels globally, and they are categorized in the following way: postal, package consolidation, and express. A postal option is defined as using the local postal authority and shipping parcels around the world. This is largely done by mutual agreements by all postal authorities to deliver each other’s inbound packages. This can be a cost-effective way to ship or an expensive way to ship. However, most postal organizations offer an express delivery option, but these packages are usually shipped via commercial flights. The second option is through a package consolidation service, which is done by consolidating many packages in a central location and then shipping them to a destination country that will deliver the package through a local delivery company or through the local postal authority. This is a very cost-effective way to ship cross-border packages, but they usually get delivered in three to 10 days. There are different service levels with these parcels, which may or may not include tracking capabilities. Some of the services will provide DDP service, which means the shipper is paying for the duties and taxes. This would require the merchant to have a duty/tax calculator in the order process. The final option would be using an express delivery service via DHL Express, FedEx, or UPS. EXPRESS DELIVERY ADVANTAGE The private delivery companies have built global networks that are designed to move packages quickly through all hours of the night. They have also developed very sophisticated customs clearance processes that allow them to clear packages before they arrive in a country. This is called a “wheels up” clearance process. Here are some of the advantages of an express service: Fast Delivery (1-3-day service) Convenience: They all have direct pick-up service or retail centers Tracking: You can track a package from the time it is picked up and get alerts One Price: You will know your exact price at the time of shipping DDP Service: All the carriers offer this service to expedite the delivery experience Reliability: They consistently deliver in their network by the same number of days An express delivery option truly delivers a great consumer experience. In most cases, there is a uniformed delivery person who delivers the package to your customer’s door. In
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many countries, you cannot leave the package on the doorstep. Many of these countries are adapting to parcel lockers and the consumer is notified where they can pick up their package, which allows the consumer to receive the package when it is most convenient for them. Remember, once a global consumer has a positive delivery experience, there is a high probability that they will order from the merchant again. If you are not in the international arena, here is simple way to calculate the potential:
International Market Potential (example) Conversion Rate (2%):
100,000 x 2% = 2,000
international orders per month Average Order Value: $100
As you can see, there are great opportunities to be selling your product globally. The express service option tends to bring more value as the value of the order goes up. There is no secret sauce to ascertain the right value to offering this option. You need to look at your margin level and determine if you can support free shipping or if you need to offer a flat rate for an international express option. Global consumer research has indicated that global consumers prefer speed over cost so putting in some flat rates to cover the shipping cost is an option. One of the biggest complaints that merchants have is the cost of an express service option. The international service is a very profitable segment for the carriers, and they are willing to offer discounts in excess of 50%... you just need to ask for it. Many of the carriers have resellers that are willing to offer these discounts without any volume commitments. An international express service option can take your business to new heights. This is what your customers are looking for, so offer it on your website and clearly define the expectations.
International Sales per Month; Monthly Website Visits (from outside your home country):
100,000 (via SimilarWeb)
2,000 x $100 = $200,000 International Sales per Year:
$200,000 x 12 = $2,400,000
Michael J. Ryan is the VP Parcel Solutions at Flat World Global Solutions and has over 25 years of experience in the parcel industry. He can be reached at 708.224.1498 or mryan@flatworldgs.com.
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Continued Growth in the Parcel Sector — the Results of Pitney Bowes’ Parcel Shipping Index At the end of September, Pitney Bowes released its annual Parcel Shipping Index, which showed some notable highlights. Among these are the fact that China is the first country to ship 100 billion parcels, as global parcel volume reached 159 billion in 2021. “2021 was a pivotal time for the parcel shipping industry as it experienced the aftershocks of 2020 and faced new challenges,” said Jason Dies, EVP and President, Sending Technology Solutions, Pitney Bowes. “It is incredible to see carriers generating strong revenue growth despite the headwinds. As consumer shopping habits evolve and inflationary pressures persist, it will be interesting to track the 2022 results.”
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For detailed insights by region, please download the ebook at https://www.pitneybowes.com/ us/shipping-index.html where you can also view a short video, infographic, and map.
CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 27
TOP TIPS TO TAPPING INTO CANADIAN E-COMMERCE
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ith peak fast approaching, many US e-commerce retailers are wondering how best to maximize sales during Black Friday, Cyber Monday, Christmas, and beyond. Ambitious brands will be shipping parcels well beyond the confines of the USA, looking for sales growth beyond the domestic market. Canada is a very worthwhile target for companies able to crack its various cross-border challenges. In 2021, Canadian retail e-commerce of physical goods generated almost US$53.77 billion in revenue, and this is forecast to increase to over US$90 billion by 2025. Clearly, opportunities abound. WHY TARGET CANADA FOR E-COMMERCE SALES GROWTH NOW? The Canadian e-commerce market is maturing, so now is a favorable time for US brands to grab some of the action. Since the pandemic, millions of Canadian shoppers who had previously only dipped their toes into online shopping have now
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become committed online spenders, generating strong growth potential for merchants both at home and abroad. At the same time, young, tech-savvy Canadians are seeking exciting new brands and products, citing lower prices and better selection as the main reasons for shopping outside the country. In recent years, online shopping orders from Canada have ramped up around Halloween to build through the holiday season, continuing well into January. As in so many corners of the globe, newly created online shopping events like Amazon’s Prime Day (July) or Singles Day (November 11, 2022) are also having a noticeable impact on e-commerce spend here. Various reports state that around half of Canadians’ online purchases are made at foreign retail sites. Canada has many small and medium-sized enterprises but these companies have been slow to enter the e-commerce industry, according the US Department of Commerce, although many are now raising their game to compete with Amazon Canada. Fashion and footwear items are popular choices for Canadians looking at US brands. But our data gathered from working with US retailers selling into the region clearly shows an
BY DOUGLAS LONGOBARDI
appetite for toys and childcare products, too, as well as home and garden equipment, electricals, and — of course — health and beauty products. HOW DO YOU BUILD SALES WITHOUT RISK OF FAILURE AND FACING EXCESSIVE COSTS? As US retailers are well aware, international shipping and customs regulations are constantly changing and vary from region to region. This, coupled with the consequences of the COVID19 pandemic, can make logistics seem like an impossible mountain to climb. However, supply chain and e-commerce experts are doing everything in their power to assist. Here are some tips for US brands targeting Canada to build e-commerce sales: OFFER THE RIGHT ONLINE PAYMENT OPTIONS Be totally up-to-speed about the various methods used to collect payment in Canada. The most popular are credit cardbased, specifically Interac Online, MasterPass, and PayPal. In 2020, the credit card was the most common payment method, accounting for 55% of the e-commerce transactions. Digital wallets ranked second with a share of approximately 25%. Some online vendors also offer prepaid card or prepaid voucher options. According to a 2020 survey, Canadian consumers were interested in Buy Now, Pay Later (BNPL) payment for their CROSS-BORDER & GLOBAL 2022 PARCELindustry.com 29
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online purchases, with the highest interest of 65.4% in the group ages 35-44 and least popular for consumers from 65 and older (47%). Offering a BNPL option could be attractive at a time when the majority of consumers will be struggling with a cost-of-living crisis during late 2022, early 2023. CHOOSE THE FASTEST PARCEL SHIPPING LANES One major challenge is the physical movement of parcels into and across Canada’s vast land mass, particularly at a time when consumers expect super-fast receipt of their purchases. Northbound freight management and final-mile routing needn’t be complicated from the US, but it will help to work with a parcel shipping partner that knows North American supply chain routes, as well as cross-border tariff and customs compliance procedures, inside out.
The final piece of advice is to pull out all the stops and offer a customer-friendly e-commerce experience to your new Canadian customers. Working with a parcel operator that has access to plenty of trucking lanes into Canada and links with local postal services will also ensure timely and consistent e-commerce shipping to newly engaged shoppers. US retailers, whether east or west coast-based, should spend time with their third-party logistics provider (3PL) to design delivery services using fast, efficient routes, and conveniently-positioned facilities located nationwide. Ideally, the chosen 3PL will have multiple entry points to Canada, comprehensive freight management and customs clearance services, and direct entry into the Canadian finalmile network. OFFER DELIVERY CHOICES AND CUSTOMER CARE TO SUIT ALL NEEDS To encourage repeat purchases, US vendors should aim to offer home delivery to Canadian customers within two to six days, to major points. If you can, offer a choice of transit options; for instance, a low-cost standard delivery within six days, as well as an expedited or “express” delivery service for a two-day delivery window, ideally enhanced with tracking and visibility. Realtime order tracking and other customer service enhancements 30 PARCELindustry.com CROSS-BORDER & GLOBAL 2022
will make Canadian customers more likely to pay for premium delivery services. However, many consumer research studies show that Canadians love free, or at least low-cost, shipping. Naturally, after-sales care is vitally important if you’re building a new customer base abroad, so make sure you have sufficient call center capability, plenty of website communication about returns and lost parcels, and — of course — be sure to offer a French language website if you are targeting Québec. It’s worth noting that French is the first official language for 22.8% of the population of Canada. MASTER CANADIAN CUSTOMS CLEARANCE The USA, Canada, and Mexico signed a trilateral freetrade agreement in 2018, known as the Canada-United States-Mexico Agreement (CUSMA). This creates a free-trade system among the three countries. US companies shipping to Canada should be aware of the raised tariff thresholds. Canada’s de minimis threshold — within which goods may be imported free of duty — was raised in July 2020, from $20 to $40, and the threshold for duty-free shipments is increased to $150. The changes stemming from CUSMA help to lower costs for shipping small- and medium-sized e-commerce orders cross-border to Canada. A new law came into effect July 1, 2021 stating that non-resident vendors whose annual sales of taxable goods in Canada exceed $30,000 CAD now need to register for Goods and Services Tax (GST) and Harmonized Sales Tax (HST). Regardless of country of origin, brands and retailers must always properly classify goods entering Canada to avoid any cross-border delays. DON’T STINT ON THE CUSTOMER EXPERIENCE Clearly, US web merchants eyeing Canada have plenty of hurdles to overcome before sales come flooding in. Help is certainly on hand from the right logistics suppliers, and the best will share a wealth of market knowledge and in-house digital services to support exciting growth plans. The final piece of advice is to pull out all the stops and offer a customer-friendly e-commerce experience to your new Canadian customers. Shoppers are becoming more web-savvy by the day, and expectations are rising fast. Communicate clearly so they know upfront how much their purchase and shipping will cost them, when and where they’ll receive it, and how easy it will be to make a return. I’m confident we’ll see US merchants winning thousands of new fans north of the border in the coming years. As long as your products, prices, and customer services are up to scratch, amazing opportunity exists to grow your e-commerce brand into Canada.
Douglas Longobardi is Executive Vice President, Sales of Asendia USA.