Inside this article
Selling and buying goods online is easy. You go to any eCommerce site in the world, choose your products, pay, and goods are delivered for you. For shops, the process is the same: they get the money, pack the products, and ship them. In theory, it is a simple process, but many businesses forget one important aspect: global trade regulations.
In reality, global trade regulations raise a lot of barriers. Companies who start selling online to reach a wider audience quickly discover that there are a lot of regulations and rules one must follow to make sure customers get their goods quickly and with no extra cost. And this means dealing with each country’s regulations.
One of the main ones is the need to deal with individual tax and duty rates of each country. Alexander Maasik, marketing specialist at Eurora, has kindly introduced us to the main aspects of global trade regulations:
Who pays the Value Added Tax (VAT)?
Most countries (but not all), want you to pay VAT for the orders you send there. For example, when selling goods to the European Union, you are expected to collect and declare VAT based on the destination country’s VAT rates. Meaning, your online platform must be able to identify the VAT rates in different countries and collect the appropriate amount of VAT. You must then declare and pay these taxes to the appropriate tax authority. Luckily, the EU has introduced the IOSS and OSS schemes that make declaring VAT easier and offer faster customs clearance for non-EU sellers.
If an online shop does not collect VAT, the country of destination usually demands it from the customer once the goods reach the destination country.
Of course, one can decide not to worry about the taxes and leave the burden for the consumer. However, people enjoy convenience. So, it is likely that in the future, they’ll use platforms that make shopping easier for them.
Global trade regulations: electronic customs declarations
When you handle your shipping as well, you need to fill out an electronic customs declaration when shipping goods across borders.
An electronic customs declaration is needed for customs agents to know what goods are being imported. Customs declarations give customs agents a variety of important information about the shipment. They list and give details about the goods that are being imported or exported.
It is used to determine the taxes and duties one needs to pay. Also, customs agents use the information in the declaration to check if the goods are even allowed into the country. Or if they can be shipped to the person who ordered them.
Denied parties and prohibited goods
One of the often overlooked aspects of global eCommerce is the need to stay compliant with international denied party lists and the country-specific prohibited and restricted goods lists.
There are a lot of people in international sanctions lists with whom a marketplace is not allowed to do business. There are also many country-specific lists. In total, there are hundreds of different lists sellers should check before selling goods to a customer.
There are many reasons some people and organizations end up on denied party lists. Most notably, the lists include terrorist organizations and international criminals. Therefore, it is pretty clear why you would want to make sure you don’t deal with customers like that.
If a company fails to do due diligence and check their customers, there is a chance to lose one’s export license. In addition to fines and other restrictions.
Import, export, and transport restrictions include the more common restrictions such as toxic, flammable, or hazardous products. Or restrictions on the shipping of lithium batteries which are classified as dangerous goods and need to meet carrier-specific guidelines. And everyone knows one can’t export illegal drugs across borders. Nor sell them.
However, not all restrictions are as straightforward as the examples above. For example, in Estonia knives are allowed across the border with blades up to 8.5 centimeters but Germany allows blades up to 12 centimeters.
Eurora Compliance solution
While all of those issues can be handled manually, this puts a lot of pressure on an online store. Especially, if you wish to scale your business and keep increasing your sales. The best solution is to automate these checks and processes as early as possible to make sure that you can legally sell and ship to every country in the world.
Eurora’s full compliance solution takes care of all of those issues for an online shop and the services can easily be implemented with API integration. The automated AI-based solution will assign correct HS codes to your package, calculate the right VAT based on the destination country and generate the electronic declaration necessary for the customs. Your customers will not be faced with hidden fees and get their goods quicker. And you can focus on growing your business.