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All Systems Go? A Checklist for the Transition from Domestic to International Ecommerce

by Ernie Schell | April 15, 2014 | No Comments

Venturing into international ecommerce can be daunting, Checklistbut like anything else, if you break it down into bite-size issues, the challenge becomes more manageable.

This is a “meal” in three courses, plus dessert:

  • First Course: Sales Taxes/VAT
    • Sales taxes
    • Duties
    • Customs fees
    • Using brokers
  • Second Course: Pricing
    • Pricing (convert or tailor to currency/market?)
    • Frequency of currency conversions
    • Payment methods and processing
  • Third Course: Fulfillment/Local Warehouses, Drop-Shipping
  • Dessert: Merchandising Restrictions by Country/Product Type

While the first three items are definitely systems-related, the last is important for your website since there may be restrictions on what you can sell in various countries.  This will be set by either the country where the customer resides or by the product supplier.

Each country, worldwide, sets its own sales tax rates (sometimes down to the state/county/province and local levels, as Canada does). While you may be liable for taxes on sales to customers in any country shipped from anywhere, in practical terms you need to be most concerned with items you maintain in a U.S. warehouse for sales to a ship-to address outside the U.S.  This is due to the fact that, by definition, you will be shipping outside the warehouse tax jurisdiction.

The consulting firm Ernst & Young and the tax services company Avalara both publish comprehensive guidebooks on worldwide sale tax rates and payment processing options. You should consult either of these for tax rates and further details.

If you are importing items from outside the country (a) where your warehouse is located, or (b) for sales to customers in another country, you will be obligated to pay duties and fees, which vary widely. A specialized broker is often advisable for handling this, especially for smaller companies that may not have a staff with the requisite expertise (see next paragraph). One piece of good news: if your product is primarily made in the U.S. or from U.S.-manufactured components, it may qualify for duty-free entry into the 20 countries where we have a free trade agreement.

You may wish to put all this in the hands of a customs broker, who can not only manage the duty and fee calculations but also submit the proper paperwork. You’ll pay a service fee, but it may be well worth it.

Should you price items in U.S. dollars or in foreign currencies? To do the latter cost-effectively, you’ll need a bank account in every currency you support for sales. The British pound, Euro, Yen, and Yuan should cover all your bases and, fortunately, a few worldwide banks like HSBC and Barclays offer accounts in all of them.

Pricing in other currencies is preferable because it’s less confusing to customers, eliminates “rounding” issues, and allows you to set appropriate price thresholds (such as £4.95 instead of £4.93). Yes, it’s time-consuming to set up (and update) all these “local” prices, but automating this can lead to more errors than a manual process does.

Regardless, you need to watch exchange rates and revise pricing as needed. Once a week is about the right interval to do this. Once a month is the minimum. If you are purchasing in foreign currencies (which most U.S. merchants do not do), try to lock in an exchange rate that is fair to both you and the seller for a minimum of six months, and preferably for a whole year.

Payment Processing
Most of the major U.S. payment processors can also manage payments in non-U.S. currencies. There are also quite a few multinational payment processors like Digital River and Elavon you can use. The Ernst & Young and Avalara guidebooks, mentioned above for sales taxes, also include comprehensive information on payment processing services. Plus, don’t overlook PayPal as a very convenient payment processing resource that most people around the world are already familiar with and consider trustworthy. You might also consider getting certified by TRUSTe as a “trusted” ecommerce site, allowing you to display their logo on your own web payment pages. Their guidelines are important to adhere to for data security purposes even if you don’t go for the certification.

One of the best ways to fulfill orders to another country is to ship your best selling dozen or two dozen items in bulk to local warehouses abroad (the U.K., Germany, Japan, Shanghai), then fulfill most orders locally from there. You can also use third-party drop-shippers in those countries, which is often cheaper than maintaining your own facility, no matter how modest.

If your merchandise mix changes frequently, consider shipping from a U.S. warehouse, in which case you will need to prepare a Bill of Lading, a Commercial Invoice, and a Certificate of Origin to go along with (or supersede) your packing slip. Your shipping company can provide these for you. These are short and routine, so not to worry. And you can outsource the entire fulfillment process to a U.S.-based 3PL, as well.

Don’t choke on “dessert!” Beware of local restrictions on selling everything from food to knives to books and other media (content is the issue). They may surprise you! Some countries won’t let you import publications with specific words in them; others won’t let you import any of the books on a “banned book” list, and so on.

Though obvious, one thing to be careful about is electrical outlet and power supply standards on a country and regional basis. If you are importing goods for sales worldwide, be sure to specify exactly how each power unit in your product list is set up. And don’t overlook the opportunity to sell power converter sockets and transformers as an up-sell item. Even if sales aren’t overwhelming on these, at least they reinforce the point about paying attention to this detail, and show that you, as a merchant, are trying everything possible to help your customers be as satisfied as possible with their purchases.

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