Shipping domestically is complicated. Companies have a lot to keep in mind, from shipping zones to box sizes, from transit time to DIM weight. International shipping, though is a different beast. These factors all play in as well, but there are a host of others too. And it can feel like you need a PhD in how to ship internationally just to feel moderately confident that your goods will get where they need to go, for the right price. One blog post can’t teach you everything you need to know, but consider this as earning your bachelor’s degree in how to ship internationally. With this information, you’ll know what to ask and you’ll be aware of any pitfalls.
Even if your business focuses on selling in the United States, there are opportunities in selling abroad you may not have considered. In a vacuum, customers don’t care where they’re buying from, as long as the cost is good, the quality high, the shipping time meets their schedules, and there are no hidden costs. The value of the average international sale is $147 US, which is 17% higher than the average domestic order. International shipping certainly adds some complexity to those sales, but it could be worth it. You may want to check your website analytics to see where your visitors are coming from, and whether you are getting requests to ship to certain locations. That can help you determine if there is sufficient demand to consider shipping there.
While many of the same shipping considerations apply for international shipping as they do to domestic shipping, there are additional layers. That includes customs regulations, duties, the destination, and whether products are allowed to be shipped into that country. Here are some of the things to look at with international shipping.
Tariffs with international shipping
International taxes go by a lot of names: tariffs, duties, value-added tax (VAT), and goods and services tax (GST). They sometimes have slightly different meanings and calculations, but the general idea is that someone has to pay a government fee for allowing the items into their country. This can add a hefty charge onto what might otherwise be a reasonable purchase and shipping cost, so it pays to know how tariffs will impact the purchase. Not every country charges a tariff and it may not be applied to every item.
A value-added tax is a fee that retailers must pay for each cross-border sale, and it is determined using a fixed percentage per shipment, no matter what is inside. It’s like a sales tax, and the amount varies by country. Duties are also determined with a percentage determined by the country, when a retailer sells its goods internationally, but it also includes the shipping cost and insurance in that value, along with the quantity of goods. Delivery duty paid (DDP) is paid by the carrier initially, and the merchant is billed. Duty delivery unpaid (DDU) is paid by the customer. It’s important to ensure that customers know they are on the hook for this tariff, and that they know how much it will be before they complete their purchase.
Merchants can handle duties a few different ways. They can bake it into the sale price or they can include or estimate the amount on the checkout page. Some shipping software systems can calculate this for the buyer. It’s imperative, though, that it be a transparent process and the buyer knows how much they have to pay if it will be extra, before hitting the “purchase” button. If tariffs are too high, the merchant may decide it’s not worthwhile to sell in a particular country, or to sell particular goods there.
You may want to talk with shipping companies before deciding whether to sell internationally, to determine the best way to handle the tariffs. Custom brokers working for the carriers may be able to advise you about the most economical way to ship your goods, whether sending over a bulk shipment to be fulfilled in another country, or shipping items individually from the United States.
International shipping documentation
When shipping internationally, you’ll need to include documentation that domestic carriers don’t require. The documentation will require the shipper to state the package value. It’s a bad idea to fudge the numbers here. The customs staff can delay or even confiscate the package if the wrong value is declared. Some of the documentation that may be required includes:
Commercial invoices
The invoice states the product value, essential for calculating the tariffs. You need to put specific information on the invoice, including the merchant name and address, the customer name and address, the items included and the quantity, description of the items, prices of the items, the terms of sale, and how it is being transported. Some countries may require multiple printed copies of an invoice to be attached to the exterior of the package. Some allow it to be submitted electronically. It’s a good idea, though, to put a printed invoice inside the package in case the label is damaged during the shipping process.
Certificate of origin
You need to include a document showing where the items were produced or obtained. That may not be the same place as the shipping country. You could buy items from China, and then ship them from the United States to Italy. The country of origin would be China. The retailer needs to sign this document.
Export packing list
In addition to an invoice, the merchant needs to include a more extensive packing list than they would use for domestic packages. It needs to include the transportation method, carrier details, type and quantities of packages in the shipment, and the weight and dimensions of each package.
Items to avoid when shipping internationally
Just as carriers have restrictions on what items can be sent through their service domestically, there are also restrictions internationally. However, these restrictions vary by country as well as by carrier. And some of them don’t make a lot of sense on face value. The United States Post Office will not ship anything internationally that can’t be shipped domestically. Plus, it won’t ship these items to any other country: perfume, nail polish, cigarettes, alcoholic beverages, explosives, aerosols, or air bags. The USPS will ship cremated remains (human or pet), but only if the country permits, the shipper uses the proper customs form, the urn is sealed properly, and it is labeled on all six sides of the box.
Check the list of countries you want to ship to before posting your goods as available for those locations. Some of the prohibited items may surprise you. The Bahamas prohibits shipments of skimmed milk in tins, and indecent articles, books, pictures, and printed matter. Canada prohibits shipments of plumage and skins of wild birds, prison-made goods for sale, and oleomargarines and other butter substitutes. China does not allow sewing machines, wrist watches, or used clothing to enter its country. Don’t ship playing cards to the Czech Republic (or several other countries). Iran does not allow import of white or brown sugar, musical instruments, or fashion newspapers.
Each carrier has its own list as well. FedEx won’t ship human remains, fine jewelry, furs, precious metals, time-sensitive materials like proposals and bids, and living animals. They also cap the value on certain goods like jewelry and art. UPS has a list of prohibited items as well, like postage stamps, bank notes, ivory, shark fins, and vaping products.
What are the best shipping strategies?
In addition to determining if you have sufficient international demand for your goods, there are other considerations for best international shipping strategies.
Language: Do you have the language capabilities to communicate with customers in that country? It’s essential that the customers understand the details not only of what you’re selling, but about return policies, tariffs, and timing.
Cost: Is the cost to ship the items (including tariff amounts) in line with what customers are willing to pay? Also, it’s usually less expensive to ship smaller, lightweight items.
Durability: If you are shipping fragile goods, you’ll have to make sure your packaging is durable and the items well protected. That can increase the cost, especially if you need to refund customers for damaged goods upon arrival.
Returns: How do you plan to handle returns? It can be expensive to ship them back, regardless of who pays for that return shipping. Customers may not want to buy from a company if returns are expensive or difficult.
Insurance: Insuring packages, especially if fragile or pricey, is a good idea. Offering insurance as an add-on for customers, with caveats about the merchant’s limited liability, is a way to lower merchant costs while protecting the customer.
Choosing the best carrier for shipping rates internationally
For domestic shipping, merchants usually use one or more of the four main shippers: USPS, FedEx, UPS and DHL. These carriers also operate internationally, albeit with different rates and advantages.
USPS is usually the cheapest shipping option when shipping internationally, but they hand off the package to local carriers once it crosses the border. That can make visibility and tracking more difficult. UPS, FedEx and DHL have offices in other countries, and will usually deliver the package from the U.S. to the destination themselves. They have multiple pricing tiers depending on how quickly the package should arrive, and also the class of service (e.g. freight versus an envelope).
As with many purchases, there is often a tradeoff between cost and speed. Shippers should think about the factors most important to them in shipping when determining which carrier to use and which service to choose. The choices can also be left up to the customer during the check-out process. It’s helpful for a shipper to get ideas by pricing the same package with each carrier to the countries it is considering. As a shipper you may already have carrier relationships and discounts, but a new shipping plan for international shipping may warrant a discussion with the carrier representative. If using shipping software, there may already be built-in discounts and options, which can easily be compared by just entering the package information once.
How to control shipping costs
Just as you may control shipping costs by using more than one carrier domestically, you can consider doing that for international shipping too. Allowing the customer to choose the best option for them, especially if they are paying all or a majority of shipping costs, is a wise move. Carriers often include a set amount of insurance per package, though the amount may not cover the product, or the product plus shipping fees.
For smaller shippers, the discounts offered by the carriers may be the same or less than you would receive from a shipping software company. In cases like that, it may pay off to incorporate that into your fulfillment service. One advantage to some of these software products, is if they catch address errors before the package is labeled. Carriers charge for attempted redelivery and address correction fees. By eliminating these errors before sending the package, those fees should be minimized. The software may also generate and transmit customs forms automatically, which can save time and hassle.
If you have your own contracts with carriers, optimizing those contracts can pay off in spades. Adding international shipping is a great reason to reach out and ask to renegotiate. But before you do, you should be prepared. You’ll want to know where you’re shipping the bulk of the international packages, the size of the packages, the type of service you want to use, and any other details that would affect cost. That’s a lot to know, especially if you’re new to international shipping. You’ll probably want to work with an expert like Shipware to do this. With the data ready and analyzed, as well as benchmarked, Shipware can walk you through the negotiation strategy with the experience of having done this on the other side – for the carriers. Shipware understands what is negotiable and by how much, and will have the plan and data ready to get you the best deal. Contract optimization can save you up to 30% of your shipping costs.
Another way to control international shipping costs is to use an invoice audit recovery program. This is a software program by Shipware that saves shippers up to 9% of their shipping costs with no cash outlay. The invoice audit recovery program analyzes each shipping invoice, looking for carrier mistakes. These errors could mean missing a guaranteed delivery time, or adding an incorrect accessorial fee. These details are nearly impossible to catch during a manual review, but the eagle-eye software can do so in seconds. The carrier applies credits directly to your account and the only fee is Shipware capturing a percentage of that savings your company never would have gotten, if it weren’t for the invoice audit recovery program.
Whether you decide to start shipping internationally or not, you should be in a better place to understand some of the shipping variables to lower costs. To learn how to make some simple changes to lower your shipping rates, please contact us.
