The following blog on international logistics is part of a 4-part series which explores our experiences with businesses in the international ecommerce space. The content examines many of the issues experienced by ecommerce businesses as they develop new export opportunities and move more and more product overseas.
The following discussion looks at the challenges of freight or international logistics. The topic builds on all the previous discussions about growing your ecommerce activities.
International eCommerce Logistics
Over the past year, CVEN has been engaged by more ecommerce businesses seeking to improve and/or simplify their current operations.
In previous blogs we explored export documentation and the importance a comprehensive commercial invoice has in ensuring your goods pass through customs smoothly. We looked at foreign compliance and how the growth in ecommerce has governments devoting more resources to ensuring conformity. We reviewed the concept of taxation and in particular, ecommerce into the UK and why you need to get yourself compliant sooner rather than later.
Finally, we bring all this together with a discussion on international freight and the logistics of getting goods into the hands of your buyers.
A quick look at the concepts and their interdependency
Everything you do internationally relies on your commercial documentation.
The HS code and country of origin you declare on your commercial documents indicates the following:
- What your product is.
- Its tax/duty status.
- Its import procedures (the rules and certifications that might need to accompany the shipment).
The declared value on your commercial invoice is the basis for calculating the taxes/duties and your incoterms indicate just who’s responsible for these costs.
Your product’s compliance, (its ingredients, labelling and certifications) also come from its HS classification. It’s worth noting that certain products will raise more flags with the authorities than others. Just try shipping eye-cream to China/Korea or bone broth to Europe/USA.
Three scenarios we think are most common are:
- You make/source the product here in AUS and export it
- The product is made/sourced in a foreign market, imported to AUS and sold here and overseas
- You make/source the product in a foreign market and you export it direct from the foreign market (or you want to)
So to put this topic in context, do you remember Marketing 101? The 4 P’s? Product, Price, Promotion and Placement. With specific reference to our 4th P – Placement, let’s look at some strategies.
Scenario 3 – You make/source the product in a foreign market and you export it directly to your customer
If you have a trusted manufacturer, who will honour your relationship and you are happy to introduce your customers to them, then your life is simple. I might suggest it’s potentially short-lived but it is simple. However, if you’re like most of us and certainly would not allow your customer to engage with your manufacturer, then you need to pay close attention to the following.
The model of exporting direct from your OS manufacturer is extremely economical. No freight costs to AUS, no import duties here, no GST liabilities on entry. All this says improved margins and cash flow.
However, there are some important processes you need in place to ensure your manufacturer remains exclusively yours. Think about new export processes to remove any trace of the manufacturer from your docs. Think about the benefits of foreign warehousing and think about a document process that keeps you as the principal and most certainly doesn’t mention your manufacturer.
It’s a great strategy and one we have helped businesses investigate and implement many times.
Scenario 2 – You make/source the product in a foreign market, import it to AUS, then export it
So now you’re in full control. The goods are made somewhere, brought to you and then you manage the despatch. This process gives you more control, however it does comes at a cost (and we truly hate giving away hard-earned margin if it can be avoided).
Here we need to think about options for placing our goods closer to the buyer. Remember the 4th P – Placement. We can courier one widget to the USA for each order and pay upwards of $30 in freight, or we can send a pallet of them in one go and possibly save ourselves $20 a pcs. Is this a possible strategy for your operations?
In this scenario, you might need to consider engaging a 3rd party logistics provider to fulfil your customer orders. Consider the risks of holding stock in a foreign market against the cost/time advantages of being able to fulfill an order in hours rather than days/weeks.
As to freight, the options are extremely broad, but we see services improving every year (excluding impacts of COVID). We do a little business with the international postal services but we often choose to leverage rates for our clients under one bulked-up express courier account.
It’s worth exploring some of the new services coming out from TNT/FedEx, DHL, Mainfreight etc and speaking to them about your specific requirements.
Did you know you can claim a refund for any import duty paid?
Australian customs allows you to claim a refund of any customs duty paid on imported goods that are subsequently exported from Australia. And the best part, you can go back 4 years. Find out more about the Duty Drawback Scheme here.
Scenario 1 – You make/source the product here in AUS and export it
If you’re looking for cheap but fast, your options are limited especially from AUS because we really are a long way away from the rest of the world. It’s really about partnering with someone that can hold a quantity of product closer to your consumers and take over that customer fulfilment. Again, get in contact with the larger international couriers and ask about their options.
Something we have seen a few times is a reciprocal deal with an old contact from a previous trade show. Your contact wants to sell to AUS and your business wants to sell to the UK. Consider some reciprocal warehousing/fulfilment arrangements. You help them here in AUS and they help you in the UK.
Previously in our e-commerce series:
- International eCommerce: Invoicing and risk – Are your international invoices the same or similar to your domestic invoices? If so, then this is an important read for you.
- Ecommerce and International Compliance – As you fast become an ecommerce tycoon, your understanding of export trade compliance is vitally important.
- Taxation Liabilities – We only need mention the UK and Europe post Brexit to give exporters the willies
Who is CVEN?
CVEN is your team of international trade specialists.
We understand the difficulties involved with starting and growing your export. CVEN is an export management company with over 25 years of experience providing export solutions to business. We get to work tackling the export side of things, so you can stay focused on running your business.
If you’ve hit a roadblock with your ever-growing online business, get in touch. We’ll help get your international ecommerce operations running smoothly.