I truly believe the vision of free trade is good for business, good for economies, good for the world and good for America. Too bad at the moment it’s not fair or free, and it has never been. Today, agreements such as NAFTA, CAFTA or TPP still leave specific countries, states or provinces on the wrong end of a deal and it is usually the United States holding the bag. In the next five years, cross-border eCommerce sales will more than double; $424 billion by 2021. China will be the leader in sales abroad, not the United States. *Forrester
On February 4th, 2016, President Obama signed into law all shipments valued under $800 USD may be imported free of duties and taxes into the United States of America. China-based eCommerce giant Alibaba received a one-way free trade agreement for the majority of their US-based customers. Alibaba can now sell all across the United States and not incur any duties or tax on the majority of their orders. What if you are a US eCommerce company trying to sell to China? Well, China just doubled their de minimis value to 1000 CNY. What a friendly gesture, too bad that’s only $150 USD off US’ generous mark by $650. If you go over China’s de minimis, it won’t be cheap.
This principle doesn’t just apply to China; it applies to most of the world. The US is one of the few countries without a federal tax such as GST or VAT. Canada has a de minimis value of $20 CAD and will charge GST, HST, and PST on any imports above that value (yes even NAFTA eligible orders). If you are an online clothing retailer in the US and have Canadian competitors, those competitors can sell any product under $800 to the US buyer, even if it is not NAFTA eligible. Yes, that is duty and tax-free to US customer for any order under the generous US de minimis. The US shop, on the other hand, trying to sell to Canadians will have at the lowest 20% duties and taxes incurred on the orders into Canada over $20 CAD.
The United States didn’t have wrong the idea of raising the US de minimis value; we just need to ensure other countries to do the same when we trade with them.
FedEx as well as other carriers offer standard customs clearance on express air shipments and do not charge brokerage fees. However, they will still charge different fees by country for other services associated with customs clearance. Here are some examples of FedEx Ancillary Fees of these are Additional Line Items, Storage, Freight Clearance, Returned Goods, Other Government Agency Processing, Temporary Import, Customized Service, Direct Payment Processing, Post Clearance Entry Adjustment and an Advancement Fee.
FedEx International Advancement Fee
The advancement fee is the most commonly charged fee of all the ancillary fees. The reason for this is FedEx will pay for all the Duty, Tax/VAT on behalf of the receiver and then collect the charges from the receiver. For example, a shipment to the UK will have a minimum charge of ￡10.50 or 2.5% of the advanced Duty/Tax whichever is greater. UPS has similar fees; to Canada, UPS had a Bond Fee, and outside of Canada it is a UPS Disbursement Fee.
Landed Cost and Ancillary/Advancement Fees
The FedEx GTM (Global Trade Manager) calculates/estimates duties and taxes that will be levied on your export shipments. Most customers do not realize that even if they use the Global Trade Manager, it will only calculate duty and tax/VAT. It does not calculate any International FedEx advancement fees or other ancillary fees. This could mean a very large cost difference between the duty/tax estimator (GTM) and the actual total landed cost to the consumer. For example, a shipment valued at $50 USD to the UK charged at a total of 25% VAT, and Duty would be estimated at $12.50, but charged another ￡10.50 or close to $17.00 USD (Google Currency Converter). These additional charges could leave your customer paying a lot more than expected or leave you with the extra cost if the order was sent DDP. Zonos™ software allows for the calculations of ancillary fees and other charges to better estimate a total landed cost.
Most eCommerce businesses have had orders or inquiries from customers with an APO or FPO shipping address. Now, like most eCommerce businesses you probably want to fulfill every order possible, but what is an APO or FPO address and how do I ship my goods there?
What is an APO or FPO?
APO and FPO are abbreviations used by the US Military Postal Service to deliver mail and packages to military personnel overseas. APO stands for Army post office and associates with the Army and Air Force. FPO stands for Fleet Post Office and associates with the Navy and its ships.
APO and FPO addresses enable the USPS to deliver mail to military members overseas. When the mail is delivered to the APO or FPO by the USPS, the staff will forward the mail to the recipient’s proper military division. The division will then deliver the package to the individual.
How do I ship APO and FPO packages?
APO and FPO packages must be sent via USPS. Overseas US military bases are considered a domestic shipment, which means you need to select the United States as the ship to country. Do not select the country where the base is located. Military postage rates are the same as U.S. domestic postage rates because the APO or FPO pays the transportation costs to the final destination.
The address format for APO and FPO shipments is the same as for domestic shipments. See the example below.
PFC John Smith
Unit 123, Box 456
AE (Armed Forces Europe)
This includes Canada, Middle East, and Africa. The ZIP/Postal Codes start with 09, e.g. 09123
AP (Armed Forces Pacific)
The ZIP/Postal Codes 962 – 966, i.e. 96400
AA (Armed Forces Central and South Americas)
The ZIP/Postal Codes start with 340, i.e. 34011
All military mail between the US and international locations is subject to customs inspection in the destination country, and customs documentation typically is required. Some countries may restrict or prohibit the importation of certain items. Check the USPS and ship to country’s regulations before shipping your goods to avoid destroyed products and returned packages.
Many businesses may have issues with APO and FPO shipments, but once you familiarize yourself with them and the proper way to ship them, they can become just as easy as every other shipment that you fulfill from day to day.
Some of the pains that eCommerce businesses may experience with international shipments are:
Dimensional Weight Miscalculations
This will put your business in the awkward position of having to contact every customer that places an order to collect extra money for shipping.
Getting billed more than expected by shipping carriers may result in not hitting your target margins or even losing money on orders.
Losing orders due to not listing international shipping charges and forcing customers to call or email to get a shipping quote. The possibility of losing casual buyers is considerably increased when potential customers can find the same product, on another website that displays the international shipping cost.
How to calculate dimensional weight
Rather than worrying about losing orders or money, and dealing with extra work from the potential problems listed above, you can avoid some of these issues by calculating international shipping weight and displaying the cost to your international customers. International shipping weight is calculated differently than domestic shipping weight, International shipments are calculated similarly to domestic overnight or 2nd-day air shipments. This is often a factor that comes into play when e-commerce businesses are experiencing one or more of the potential pains listed above.
While almost every e-commerce business has their domestic rate, billable weight, and shipping charges calculating correctly, they may not have taken all of the factors into consideration that differentiates international and domestic billable weight. Billable weight is the greater of the actual weight and dimensional weight(when applicable). One way to ensure that you are always billed the actual weight on your domestic ground shipments is to only use boxes that are below 5184 cubic inches. You may have to pack one shipment in multiple boxes, but you will save yourself a lot of shipping charges that you would be billed for otherwise.
One of the biggest disconnects in calculating international billable shipping weight vs. domestic billable shipping weight is dimensional weight. Depending on if a shipment is a domestic or international shipment, the dimensional weight will vary because the domestic dimensional weight factor is different than the international dimensional weight factor.
The dimensional weight factor is a value that all of the major carriers use to calculate the dimensional weight. The formula that is used to calculate dimensional weight is Length x Width x Height / The Dimensional Weight factor. The dimensional weight factor for domestic shipping is 164, and the international dimensional weight factor is 139. You may not think that dimensional weight makes much of a difference now, but in the examples below, you will notice how big of a difference the dimensional weight can make in what you need to charge customers and what you will be charged by the shipping carrier.
International Shipment Dim Weight
Cubic Inches: 1728
Cubic Inches: 4,096
Cubic Inches: 9180
Dimensional Weight: 13 lbs.
Dimensional Weight: 30 lbs.
Dimensional Weight: 67 lbs.
Actual Weight: 20 lbs
Actual Weight: 7 lbs
Actual Weight: 40 lbs
Billable Weight: 20 lbs
Billable Weight: 30 lbs
Billable Weight: 67 lbs
Domestic Shipment Dim Weight
Cubic Inches: 1728
Cubic Inches: 4,096
Cubic Inches: 9180
Dimensional Weight: 11
Dimensional Weight: 25 lbs.
Dimensional Weight: 56 lbs.
Actual Weight: 20 lbs.
Actual Weight: 7 lbs.
Actual Weight: 40 lbs.
Billable Weight: 20 lbs.
Billable Weight: 25 lbs.
Billable Weight: 56 lbs.
In writing this blog post we are hoping to help give eCommerce businesses the knowledge and tools to calculate international billable shipping weight properly. While it may be a little overwhelming, this is something that can help increase your conversion and revenue by capitalizing on the international traffic that is naturally landing on your site every day. If you do not have the software or technology in place to calculate the correct international shipment billable weight, you can always meet with iGlobal or another 3rd party vendor to discover the best international solution that fits your business.