Cross-border e-commerce logistics, how to cope with the increasing rate of customs inspections in multiple countries?

How to deal with rising customs inspections in multiple countries for cross-border e-commerce logistics?

1. From Rough to Refined: Cross-Border E-Commerce

2017 was a turning point for the cross-border e-commerce industry to shift from rough to refined. Changes in policies and new demands from Europe, the United States, and Southeast Asia have brought about new problems for overseas warehouses, platforms, and sellers.

Prior to 2017, the cross-border e-commerce industry was in a rough stage. Sellers hid behind platforms, overseas warehouses, logistics companies, and clearing agents. They basically only needed to purchase goods from the market and then sell them on the platform, without worrying about local laws and regulations. Local enforcement agencies, customs, and taxation agencies would also first find logistics companies, clearing agents, freight forwarders, overseas warehouses, or platforms with physical presence in the local area, and then find sellers through them. Therefore, regulatory authorities at that time mainly targeted platforms, logistics service providers, and warehousing service providers. If buyers complained to the police, the police would also come to these logistics service providers and platforms.

In 2017, because the online sales market in the UK was large enough, in addition to Amazon, there were other e-commerce platforms in the local area with very good sales. Therefore, European overseas warehouses first landed in the UK, followed by Germany. Due to a large number of goods imported into the local area through the B2C small package mode, the UK soon noticed tax and product compliance issues and was the first to propose to cancel the policy of VAT exemption for goods under 150 euros.

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Specifically, there were many quality problems with goods in the stocking mode before, which caused frequent quality disputes in the UK and were complained about by consumers to the Trading Standards department. After that, the department would find overseas warehouses or even platforms to request various compensations. In 2017, in response to this issue, the UK, the EU, and the United States have introduced various quality and safety regulations, including EPR and clothing laws, which began to be implemented in that year.

With the further rapid development of cross-border e-commerce, the European tax bureau has proposed that one-stop tax declaration must be applied to directly shipped products, which is the IOSS policy that has been implemented since July 1, 2021. Clearly, both the UK and the European tax bureau have been paying attention to compliance formats for a long time, and when tax losses and risks to local consumers are caused, they began to introduce compliance requirements.

After 2017, cross-border e-commerce appeared in boutique mode, followed by vertical e-commerce and independent stations. Now, many large sellers have their own technical thresholds or product patents, and need to consider the design and development of front-end products, as well as product positioning according to the consumption habits of the target country’s market, and so on.

This fully demonstrates that cross-border e-commerce has gradually moved towards refined operations, and in this process, there are many compliance issues to consider, and it is difficult for a company to establish such a system in a short period of one or two years.

2. Compliance pain points in cross-border e-commerce logistics

All along, the compliance issues that cross-border e-commerce needs to face are mainly reflected in the aspects of product safety, intellectual property rights, tax and foreign exchange regulation, trade barriers, and laws and regulations. During the extensive operation period, these issues mainly focused on sellers and logistics warehousing service providers, but in the era of refined operations, these issues have become more complex. Platforms, sellers, and logistics warehousing service providers need to jointly face more compliance pain points and risks.

The entire chain of export cross-border e-commerce is very long, and compliance issues almost run through all aspects of this chain. Now, even the selection of raw materials before product production needs to consider relevant compliance issues, such as whether there are harmful substances, which may become a risk point for long-term operation of a product. In the product selection process, it is necessary to consider whether it complies with local policies and regulations, and after the product selection, it is necessary to account for tax issues such as tariffs and value-added tax in the target country, as well as tax and fee calculations, and prohibited requirements. Then, there are customs clearance checkpoints during logistics transportation, which is the most difficult part of the entire logistics supply chain. Although the cost of customs clearance is very small, the risk problems brought by checkpoints will be very large, which is equally important for both B2B and B2C.

In the B2B link, many overseas warehouses have encountered the same problem in the past. Once local law enforcement agencies or customs discover problems, they do not first look for sellers and platforms, but instead look for overseas warehouses with assets in the local area and inquire how the goods came in and whether they meet local legal or safety standards. This is one of the issues that arise when building overseas warehouses. In addition, when clearing customs, whether it is in the United States or the United Kingdom, there are often many checkpoints.

At that time, goods imported into European and American overseas warehouses needed to be classified with customs codes, but such a system could not be found in the entire market. It all had to be done manually, which required the establishment of a team specifically for customs coding, collecting various product information, confirming whether they met certification standards and requirements, and identifying any restrictions or permits, among other things.

To establish such a team, besides high labor costs, there are also problems with processing efficiency and the accuracy of information.

Now, in the B2C link, starting in 2017, many countries began to cancel duty-free quotas for personal items. Many countries even followed China’s customs clearance policy, requiring local tax numbers or identity card numbers for small package goods entering the country, and sellers on the platform also need to collect taxes on the goods sold. This is actually a bottleneck for logistics and cross-border e-commerce companies.

3. How to achieve low-cost and rapid compliance?

Regulatory compliance in various countries is becoming increasingly stringent and involves a wide and complex range of areas. Compliance with goods not only involves China’s export compliance, but also involves the operation and licensing of production sites, transportation, import and export customs clearance, tax supervision, trade protection, platform policies, and so on. Ensuring compliance with goods, trade, and tax regulations has become the key to success for cross-border e-commerce and logistics companies!

Cross-border e-commerce and logistics companies are not unwilling to comply, but they urgently need to seek a balance between controlling costs, reducing compliance risks, and improving customer satisfaction.

To solve these problems, an intelligent information integration platform is needed. That is to say, in the case of a long enough full chain of cross-border e-commerce, use systems or methods of big data and machine learning as much as possible in each link to integrate a large amount of information and data into one system, and serve logistics companies, sellers, and platforms through big data analysis.

eurora™, as a global expert in product compliance, is committed to helping enterprises efficiently comply with massive products across multiple countries through AI logic and big data support.

The eurora™ product compliance SaaS system can help customers quickly classify global customs codes, scan prohibited and restricted products, calculate import and export taxes and fees, and obtain clearance regulations in various countries. It helps enterprises greatly reduce product compliance costs, improve the efficiency of the entire compliance process, and help cross-border e-commerce platforms, sellers, and logistics companies achieve efficient and accurate compliance with massive products across multiple countries, achieving cost savings under compliance requirements.

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