The majority of the world’s purchasing power — 80 percent, to be exact — live outside the United States, according to the U.S. Chamber of Commerce. This makes international shipping one of the best ways for American companies to attract new business. But companies that ship worldwide also face significant challenges and risks, ranging from unexpected shipping delays and lost packages to tariff barriers and fraud. Here’s what your company should consider when deciding whether or not international shipping is worth the risk for your business.
The biggest attraction of global shipping is the vastly increased customer base you can reach by expanding your market. With this increase comes wider exposure for your brand, which can build your company’s reputation both abroad and at home. You can use international shipping to penetrate market niches your competition isn’t serving, or to outflank international competitors.
With the increased demand for international commerce, Internet retailers such as Amazon and eBay and shipping companies such as UPS and FedEx have developed tools and services to make it easier than ever to ship worldwide.
For instance, UPS’s TradeAbility tool helps you automatically estimate costs, identify tariff codes and ensure compliance with U.S. export regulations, as well as the import regulations of your customer’s country. With today’s technology, mailing a package internationally is virtually as easy as mailing it domestically.
International Shipping Risks and Solutions
While shipping worldwide is widely available, it isn’t without risks.
The nature of shipping internationally makes fees higher than shipping domestically. Additional costs include duties, taxes and customs clearance fees. While your customers generally pay for these fees, the increased price can reduce your marketing appeal when up against competitors based in your customers’ countries of origin.
To be successful, your marketing and sales plan must offset this factor by invoking benefits such as higher quality or better service. You’ll need something to justify higher prices. Your business plan must also be designed to move enough volume to make the smaller profit margin of international shipping worthwhile.
Due to the greater distance and number of transit points involved in international shipping, the likelihood of shipping delays increases. Opportunities for mistakes, resulting in lost packages, are also greater. Further, most shipping services in other countries don’t provide the same degree of delivery confirmation that we are used to domestically. Without clarity on the movement and arrival of shipments, your team might be forced to operate on assumptions, which can be costly.
Your customer service team must be prepared to address these issues with policies aimed at promoting and maintaining customer loyalty. For instance, you might offer no-hassle refunds or free gifts to customers who experience delayed or lost orders. Keep close track of what percentage of orders get delayed or lost and how much it costs you so that you can factor this into your expenses and profit and loss projections.
You must also guard against losses from fraud when shipping internationally. International credit card transactions lack some of the safeguards built into domestic orders.
Protect yourself by being aware of common red flags, such as unusually large orders, use of P.O. Boxes to mask identity, and multiple shipments to the same address processed with different payment methods. Be exceptionally alert when processing orders to certain countries in Eastern Europe, Southeast Asia and Africa that are havens for international fraud.
When heightened alert is warranted, require additional verification of credit cards, such as scanned images of physical cards or two-factor verification of identification. Use automated tools to check the country of origin indicated by customer Bank Identification Numbers against customer shipping information to make sure they match. Contact issuing banks and your international merchant processor for support and possible tools.
International Shipping Best Practices
When shipping internationally, UPS recommends following some basic steps:
- When you receive an international order, verify that there are no prohibited goods or service restrictions in your customer’s country impeding you from fulfilling the order.
Review your international shipping service options and select one that fits your schedule and budget.
Choose an international billing option that works with your business model.
- Reduce red tape by using web-based tools such as TradeAbility to ensure compliance and avoid delays and penalties. Using electronically-submitted customs forms will enable you to clear customs faster.
- With your order ready to go, prepare your international shipping label online. You can then pay with your business credit card or account.
- Schedule a pickup or drop off your order for shipment.
To streamline your orders and avoid shipping delays, have essential information ready to enter into forms, including customer contact information, an accurate description of goods and the value of goods. More shipments get held up by inaccurate descriptions of goods than by any other cause. Additionally, some countries require you to include your company’s letterhead on commercial invoices, so be sure to comply with any and all applicable regulations.
With each order, include a destination control statement expressly declaring your compliance with U.S. Export Administration Regulations and prohibiting diversion contrary to U.S. law. For more details and tips, consult the UPS international shipping how-to guide.
Finding International Shipping Carriers
When choosing international shipping carriers, cost, insurance and customs are common considerations.
The U.S. Postal Service (USPS) is the least expensive major U.S.-based international postal carrier, typically costing 50 percent to 75 percent less than FedEx or UPS. However, one tradeoff for this reduced price is less sophisticated tracking services. FedEx, UPS and DHL Express offer door-to-door tracking on all international services, while USPS only offers door-to-door tracking on Express International shipments.
While USPS, UPS, FedEx and DHL all include $100 insurance for international shipments, not all carriers provide this feature. Always verify if insurance is available and at what amounts when researching shipping carriers.
You can sometimes avoid customs delays and fees by changing from one carrier to another. Pay attention to which customs delays and fees your shipments typically encounter, and check if other carriers can avoid these issues.
Calculating International Shipping Rates
International shipping costs are determined by shipment origin, destination, shipment date and weight. Major carriers provide online calculator tools to help businesses calculate shipping costs and develop financial plans which take shipping costs into account. For instance, UPS provides calculator tools for both package and freight international shipments. You should design your sales and marketing plan based on the prices your customers will have to pay for shipping and how that added cost will impact sales volume.