Top 5 Barriers to Cross Border eCommerce
#1 Change in VAT regulations
VAT fraud for distance sales in the EU is estimated at €5 billion per year and because of this, New VAT rules for eCommerce will be introduced on January 1, 2021.
Aims of these new rules:
- Benefit business due to the substantial reduction in cross-border VAT compliance costs. This will facilitate greater cross-border trade.
- Ensure EU businesses can compete on equal footing with non-EU businesses that are not charging VAT.
- Give member states a boost as they gain through an increase in VAT revenues of EUR 7 billion annually.
#2 Reduction or elimination of de-Minimis
De minimis value, the threshold at which goods can be imported without paying VAT, varies from country to country.
- Items imported into the United States are subject to duty when the value is over USD 200, but a bill in Congress would raise that amount to USD 800
- In Australia, duty and taxes kick in after the first AUD 1,000
- In Canada, it’s C$ 16. The de minimis threshold in Canada is set by the Government of Canada through the Postal Imports Remission Order and the Courier Imports Remission Order.
- In Europe, the average is about €150
#3 Increasing legislation around returns
Under EU rules, a trader must repair, replace, reduce the price or give you a refund if goods you bought turn out to be faulty or do not look or work as advertised. If you buy a product or a service online or outside of a shop (by telephone, mail order, from a door-to-door salesperson), you also have the right to cancel and return your order within 14 days, for any reason and without justification.
International Post Corporation (IPC) research shows that return rates have not changed in recent years.
Cross-border return rates were highest in the Asian markets, the US, Germany, and the UK.
How do consumers typically make returns?
- A cross-border return was most likely to be dropped off at a post office (21 percent),
- Other methods include pick-up from home or office, drop off at a parcel locker, or drop-off at a postal service point.
- Pick-up from home or office was highest in Asian markets.
- Drop off at a parcel locker station was highest in Estonia (36 percent)
#4 Strong enforcement of compliance rules
Many companies admit to struggling with how to manage the payment and collection of customs and taxes. New research shows that:
- 6 percent of companies across the UK, Germany, and Sweden are not confident about complying with the various real-time e-invoicing controls implemented across Europe
- 51 percent expect no investment in internal VAT functions in 2020
- 46 percent don’t possess an internal VAT expert; 23 percent search the internet for advice
- 58 percent find ‘a lack of comprehensive understanding of VAT rules of different countries’ one of the three most difficult aspects of tax management
- 29 percent of UK firms ranked ‘real-time reporting’ as the most pressing issue.
#5 Changing customer expectations
As more and more people turn to online shopping, and the selection of online shops continues to grow, so too are customer expectations. Consumers want:
- Total cost transparency
- Ability to pay taxes in advance
- Assistance creating valid documentation for customs
- Identification of restricted parcels
- Identification of denied parties
How Escher and Hurricane together can enable organizations to meet these challenges head-on
Know what you owe: taxes and duties estimation
Riposte’s taxes and duties calculator takes real-time data on treaty agreements and duty and tax thresholds into consideration to provide customers an accurate estimate of their landed costs. Posts can offer this calculator as an in-cart feature to enhance the user experience.
Enables postal customers to provide complete and compliant shipping manifests and ITMATT data. This allows packages to quickly and efficiently clear customs and successfully reach family, friends, or customers.
Product restriction screening
While the restrictions on some items, like drugs, are clear, others, like a paintball gun, are trickier. Our platform offers product restriction screening. Customers enter information about the product, including the SKU and the delivery address, into our module, which uses real-time data to determine whether it’s a restricted product in the receiving country. This prevents costly confiscations, frustrated senders, and disappointed recipients.
Denied party Screening
When customers type the recipient’s name and address into the Riposte system, our compliance tool can check whether they are on a Denied Parties list, whether it’s an individual or a corporation. This eliminates the real risk of being slapped with a fine or sentenced to jail time, particularly for e-commerce companies engaged in international sales.
To find out more about how Escher can help, please contact your Account Manager, watch a video about our partnership with Hurricane or talk to us here.