PRIORITISE REGULATORY COMPLIANCE
IN YOUR E-COMMERCE STRATEGY
by James May, Head of Global eTrade Services, CrimsonLogic (North America) Inc
The surge in Internet and mobile phone adoptions in emerging markets will push the global B2C online retail sales to reach US$2.3tr by 2017. The increasing number of smartphone owners, improving openness towards mobile shopping, emergence of innovative and secured shipping and payment platforms are causing the global B2C online retail to boom. For the very first time, Asia Pacific will leapfrog North America to lead the consumer online retail spending, contributing US$525.2bn in 2014. Led by China, Indonesia, and India, several other developing economies across Southeast Asia, growth in the Asia Pacific e-commerce market is set to spearhead e-commerce growth in the near future as its penetration approaches 50 per cent.
With e-commerce growing at such a rate, cross-border online retail brands are taking great pride in speed of service and delivery, more than traditional, brick-andmortar retailers. The nature of the business simply does not allow trading issues, such as customs holds, late deliveries, or inefficient return procedures, lest losing credibility or putting their reputations at stake. For an e-commerce company to be successful, the cost associated with fulfilling the order must be worthwhile for the customer. Therefore, striving to simplify, standardise and harmonise customs procedures across operations around the world would greatly simplify trade and have a direct positive impact on costs.
Cross-border challenges for online e-commerce companies
An increasing number of e-commerce companies in the region – both big and small – are feeling the pressure of ensuring trade compliance, while at the same time, dealing with their e-business and cross-border expansion strategies. The physical flow of goods across borders resulting from e-commerce is unfortunately none the simpler than the traditional flow of goods. In fact, they both face the same challenges in terms of cost and time of border formalities. However, complicated border clearance procedures can be an even greater obstacle for e-commerce companies. The high costs of determining import requirements and completing excessive paperwork from thousands of transactions daily hamper e-commerce. This is in addition to global regulatory issues, like Payment Card Industry Data Security Standard for online payments, regional compliance challenges like Advance Security Filing requirements in countries like the US, Canada, EU and Japan, and local regulations, such as consumer rights, privacy and data protection laws, for the various countries in which they do business.
On the other hand, ensuring compliance with custom procedures can act as an effective measure to combat smuggling, commercial frauds and counterfeit goods. Though there are government efforts to protect their borders from such illicit activities, e-commerce may still present new challenges and concerns for custom agencies in the region. Large e-commerce companies, like Alibaba, who is already spending more than US$16m annually to fight counterfeits, have been constantly under such scrutiny, especially since its record US$25bn Initial Public Offering in 2014.
Putting in place trade compliance practices, such as monitoring for Denied Parties, can protect US exporters from costly fines and penalties. This practice also additionally involves checking for controlled products from embargoed or sanctioned countries.
Here are some of the best-practices e-commerce companies can implement to overcome the bumps in the road to trade compliance in the digital age:
e-Commerce trade compliance tools Regulatory trade rules are only going to become more complex. There are costs involved for e-commerce companies to meet complex customs regulations as well as costs incurred due to noncompliance in the form of hefty fines and lost sales. In order to reduce the risk of overwhelming profits from shipping small parcels, e-commerce companies can look at adopting automation for submission of manifest and trade declaration data to customs authorities. The amount of work required to complete a customs declaration for a US$20 shipment is the same as the work required to clear a US$1,000 shipment so automation and use of EDI is imperative to maintain margins in this business.
A compliance team Every e-commerce company should train a compliance team, who will attend trade-related training in the markets where it operates. The e-commerce business moves so quickly that it is essential to stay within the law at all times. If your company sells products or technology that can be sensitive when crossing borders, the compliance team must be equipped with the relevant knowledge.
Collaboration for success Internet-based e-commerce technologies can be implemented by relevant companies to provide better integration among members of the trading ecosystem. For smaller e-commerce companies who do not control their own logistics or supply chains, international trade specialists can come in to fill the gap as they have the network and expertise in dealing with compliance-related to trade.
Streamlined warehousing, distribution and shipping processes Selling online successfully requires timely delivery. After all, online trade is critically based on the consumer’s trust that the product will be delivered intact and on time. Collection of information aside, slow customs clearance, poor infrastructures, and inefficient transport services can further slow down the movement of goods sold online, especially in developing countries. e-Commerce companies need to take a closer look at its trade ecosystem, local and regional distribution network and warehousing capabilities, and make sure that they are also optimised, leaving no room for error in the physical part of the trading process.
To alleviate some of the challenges of the last mile delivery, some e-commerce companies are tapping on some Uber -like services like Lalamove and Gogo Van, which allow companies to tap on private vans, trucks and even motorbikes to deliver cargo from point A to B. Scheduling a pick-up is the same as using Uber where you can find a local driver using the app and arrange for the pick-up in minutes. These services can be used as part of a company’s regular supply chain or for when there is an unscheduled spikes in demand.
While the use of electronic means and the Internet can make the process of initiating and doing trade a lot easier, faster and less expensive, collecting information can also be a costly activity especially when it involves acquiring information across national borders. As illustrated above, these costs can sometimes be so high that they can be considered a barrier to trade on its own.
The Internet has an immense potential to promote international trade much as lifting other trade barriers would. However, e-commerce companies need to know how to leverage this inherent capability of theirs, turn it around and make it work for the business, particularly in the area of trade compliance.
About the Author
James May is Head-Global eTrade Services at CrimsonLogic focusing on product and business development in the trade facilitation and customs compliance domain.
He holds a bachelor’s degree and a post-graduate diploma in International Business, is a Certified Customs Specialist CCS designate administered by the Canadian Society of Customs Brokers (CSCB), a Certified International Trade Professional C.I.T.P. designate administered by the Forum for International Trade Training (FITT) and also a Project Management Professional PMP designate administered by the Project Management Institute (PMI).