June 15, 2017
Countries and populations have been trading goods for ages. Luckily, the international trade ecosystem has evolved quite drastically since the days of the Silk Road and Spice Route, made famous by early explorers like Magellan and Christopher Columbus.
If Columbus were alive today, he could just order some spices online and could forgo a really long voyage.
We’ve come a long way in developing infrastructure and technology to power the global commerce industry that we know today, particularly the portion known as International Ecommerce (or cross-border ecommerce).
Last year, eMarketer estimated retail sales across the globe would reach $22.05T USD in 2016, with global ecommerce accounting for $1.92T, or 8.7%, of total retail sales worldwide. While the growth rate of overall retail sales had slowed down, eMarketer anticipated a 23.7% growth rate in online sales worldwide last year. By 2020, retail ecommerce sales are projected to reach $4.06T, more than doubling in the next four years.
It’s clear that global ecommerce is here to stay, so merchants expanding internationally should read up on the nuances involved in international fulfillment.
How does international ecommerce differ from traditional ecommerce?
Fulfilling orders for buyers located in a different country than the seller requires goods to be exported, which means they become subject to more regulations than an order shipped domestically.
Given the expansion of international ecommerce and compliance regulations, merchants of all sizes must learn how to navigate processing and exporting cross-border shipments. Traditionally, this responsibility fell more to manufacturers and suppliers, but in the changing economy, it’s a concern to anyone doing international business.
How can Ingram Micro Commerce ensure export compliance for my cross border orders?
As international ecommerce is growing, we have seen more and more of our customers exposed to compliance regulations, so we’ve taken a few steps to bolster our international ecommerce support.
- We classify goods in the product catalog using an HTS Code versus an HS Code
- In order to import goods, merchants, suppliers and manufacturers are required to provide a code that determines the tariff or duty rate of the traded product. This code also helps countries that track import and export numbers keep a record of international trade statistics.
- An HS Code is a universal 6-digit product code and is used worldwide, regardless of country of import. An HTS Code, however, is specific to the United States and is required for importing and exporting goods. An HTS Code starts with the standard 6 digits, but also includes 4 additional digits, making it 10 digits long (the additional 4 digits are used to identify subcategories).
- Why is it beneficial to capture the HTS Code within the product catalog?
- While the HS Code is universal, capturing only the 6-digit code may cause delays when a product is being shipped to a location outside of the U.S. When exporting goods from the U.S., an order will be placed on hold if the product is valued over $2,500, as it may require additional paperwork. By having the 10-digit HTS Code in our system in advance, our compliance team can quickly determine whether an Electronic Export Information (EEI) filing is necessary.
- In short, an HTS Code is one that anyone importing or exporting from the U.S. should familiarize themselves with. We provide the field to enter this code within our product catalog so that it’s available when merchants are uploading products. This allows proactive prevention of holdups related to export compliance, should we need the code for exporting an order.
- The Export Control Classification Number (ECCN) can be up to 11 digits long and is used to categorize items based on the Commerce Control List (CCL) for export control purposes. The CCL is divided into 10 categories. If your product falls into one of the 10 categories, it will require an export license from the Department of Commerce. If your product is not listed on the CCL (the majority of commercial products are not) it will be designated as EAR99 and typically will not require an export license.
- Why does Ingram Micro Commerce & Fulfillment capture ECCNs for all products?
- By capturing the ECCN within a merchant’s product catalog, international orders will not be held up during processing because the necessary data to export is on hand. This can eliminate potential delays in a merchant’s cross-border fulfillment process and increase the speed of delivery. Should a product fall within one of the categories on the CCL, Ingram Micro Commerce & Fulfillment can process the necessary paperwork on the merchant’s behalf to ensure that the order complies with U.S. government regulations.
- U.S. government regulations state that it is illegal to export goods, regardless of their nature, to a person or entity on the denied party list. Fines for violating this can reach up to $1M per violation in criminal cases, according to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS). Additionally, administrative cases could result in a penalty of more than $250,000, or two times the value of the transaction.
- What is Ingram Micro Commerce doing to prevent shipments to restricted parties?
- We have implemented industry standard compliance software that checks the name of a customer on any outbound order from an Ingram Micro facility against the Restricted Party List (RPL), which includes denied persons, entities and unverified lists. While we have always checked against the RPL, this compliance software allows us to speed up the process along with making it more effective. The compliance screening occurs before the order is even received by the warehouse management system, so as to not waste operational time by fulfilling an order that is destined to a restricted party.
- Screening against the RPL is done to protect merchants against fines and punishment resulting from shipping to a restricted party. As a U.S.-based company, any shipment exported out of the U.S. or going between other foreign countries (excluding U.S. to Canada) will run through the compliance software. A small percentage of export orders generate a high match to a name on the RPL, and by screening on behalf of our customers, we can ensure export compliance regulations are met.
- Shipping goods from the U.S. to a foreign country (excluding Canada) often requires additional documentation (i.e., high value orders, product on the CCL, etc.) Because of this, many shippers look to their export partner to file and process documentation on their behalf. In order for Ingram Micro Commerce & Fulfillment to be the exporter on behalf of our customers, customers must grant us the power of attorney for their exports. The ability to file export documentation on your behalf allows us to provide a speedy export process with limited order delays.
- Will Ingram Micro Commerce act as a power of attorney?
- Absolutely! Our merchants who export goods at least once a year and who have a U.S.-based fulfillment operation are required to update their Terms of Service with us, to include an addendum for export services. This allows us to have the power of attorney on file in case an export order is submitted and requires additional paperwork. In instances where additional export documentation is required, a member of our team will submit documentation while the order is being fulfilled and processed, so as to not slow down the export process.
If you are an Ingram Micro Commerce & Fulfillment merchant who has not signed our Export Terms of Service, you can find the document here.
If you’d like to talk more about international ecommerce or the export compliance process, click here to talk to a member of our team.