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Tracking Number, the Hidden Hero of International Delivery

Tracking Number, the Hidden Hero of International Delivery

Phuc Le
May 18, 2023

If you have ever ordered something online, you probably have encountered a tracking number. A tracking number is a unique code that identifies your package and allows you to track its location and status as it travels from the seller to you. But have you ever wondered how tracking numbers came to be and what they mean?

The long and winding road of the tracking number

Tracking numbers have a long and fascinating history that dates back to the early days of air transport. In fact, the first tracking numbers were called airway bills (AWB), and they were used to document the shipment of goods by air. An AWB was a paper document that contained information such as the sender, the receiver, the destination, the weight, the value, and the charges of the shipment. It also served as a receipt and a proof of delivery.

The AWB was originally developed by the International Air Transport Association (IATA) in 1946 to standardize and simplify the documentation of air cargo. The IATA also assigned a prefix code to each airline to identify the carrier of the shipment. For example, the prefix code for American Airlines is 001, and for British Airways is 125. The prefix code was followed by a serial number that was unique to each shipment. Thus, an AWB number looked something like this: 001-12345678.

The long and winding road of the tracking number

As eCommerce grew in popularity and demand, so did the need for more efficient and reliable tracking systems. Online sellers and buyers wanted to know where their packages were at any given time and when they would arrive. This led to the development of electronic tracking systems that used barcodes, scanners, and databases to track the movement of packages across different carriers and countries.

Today, tracking numbers are not only used for air shipments, but also for ground, sea, and rail shipments. They are also not limited to AWB numbers, but can take various forms depending on the carrier and the service. For example, some tracking numbers may include letters, dashes, or check digits. Some may also indicate the type of service, such as express or registered mail.

Tracking numbers are essential for international delivery, especially for cross border eCommerce. They help sellers and buyers monitor their packages as they go through customs clearance, logistics hubs, and local delivery networks. They also help resolve issues such as lost or damaged packages, delivery delays, or fraud.

Tracking numbers have come a long way since their inception in 1946. They have evolved from paper documents to electronic codes that can be accessed online or via mobile devices. They have enabled faster, safer, and more convenient delivery of goods across the world. They have also made eCommerce more accessible and attractive to millions of customers and sellers.

It actually facilitates the growth of eCommerce worldwide!

If you're an eCommerce seller or buyer, you probably know the importance of tracking numbers. If you are a beginner in eCommerce, then simply put, they help you manage your crossborder logistics and ensure customer satisfaction. Let’s explore some of the benefits of tracking numbers and how they can make your eCommerce business more efficient and profitable:

It actually facilitates the growth of eCommerce worldwide!

  1. Tracking number provides visibility and transparency

One of the main functions of a tracking number is to provide visibility and transparency for both sellers and buyers. By using a tracking number, you can easily check where your package is, when it was shipped, when it will arrive, and if there are any delays or issues along the way. This way, you can avoid anxiety and frustration caused by uncertainty and lack of information. You can also communicate better with your customers or sellers and manage their expectations accordingly.

  1. Tracking number enhances customer satisfaction and loyalty

Another function of a tracking number is to enhance customer satisfaction and loyalty. Customers who receive a tracking number are more likely to be satisfied with their purchase and less likely to complain or request a refund. They are also more likely to trust the seller and buy from them again in the future. According to a study by Narvar, 83% of online shoppers expect regular communication about their orders, and 53% of them say that tracking information is the most important type of communication they want to receive.

  1. Tracking number reduces costs and risks

A third function of a tracking number is to reduce costs and risks for both sellers and buyers. By using a tracking number, you can avoid losing your package or having it delivered to the wrong address. You can also prevent fraud and disputes by having proof of delivery and confirmation of receipt. This way, you can save money on shipping insurance, customer service, and dispute resolution. You can also protect your reputation and ratings as a seller or buyer.

  1. Tracking number improves efficiency and performance

Its fourth function is to improve efficiency and performance for both sellers and buyers. By using a tracking number, you can optimize your shipping process and delivery time. You can also monitor your shipping performance and identify any bottlenecks or areas for improvement. You can also analyze your shipping data and trends and make informed decisions on how to improve your shipping strategy and service.

  1. Tracking number enables cross-border eCommerce

A fifth function of a tracking number is to enable cross-border eCommerce. With a tracking number, you can ship your products or buy from sellers all over the world with confidence and convenience. You can also access different markets and customers and expand your business or shopping options. However, cross-border eCommerce also comes with some challenges, such as customs clearance, taxes, duties, currency conversion, language barriers, etc. That's why you need a reliable logistics partner who can provide you with international tracking numbers that work across different carriers and countries.

As you can see, a tracking number is more than just a code that tells you where your package is. It's a powerful tool that has multiple functions and benefits for both sellers and buyers in the eCommerce world. Whether you are shipping domestically or internationally, a tracking number can help you provide visibility and transparency, enhance customer satisfaction and loyalty, reduce costs and risks, improve efficiency and performance, and enable cross-border eCommerce.

Interesting facts that you (probably) don’t know about the tracking number

  • 90% of customers want tracking numbers. According to a report by DHL, 96% of consumers say that tracking is important when buying products online from another country, and 87% say that tracking is important for their cross-border purchases. This shows that tracking numbers are not just a nice-to-have, but an essential component of the eCommerce experience. Providing tracking numbers can increase customer satisfaction and trust in the merchant.
  • Tracking numbers increase repeat business. According to a study by Pitney Bowes, 96% of consumers are likely to return to a merchant's website if they have a positive delivery experience, which includes the ability to track their package.
  • Tracking numbers reduce customer inquiries. When customers have access to tracking information, they are less likely to contact customer support with inquiries about their order status. A study by MetaPack found that providing tracking information reduced customer inquiries by up to 50%, freeing up support staff to focus on more complex issues.
  • Tracking numbers improve delivery accuracy. Tracking numbers not only benefit customers, but they also help merchants and logistics providers ensure that packages are delivered accurately and on time. According to a report by Pitney Bowes, 97% of merchants believe that tracking numbers improve delivery accuracy, and 87% say that tracking numbers improve their overall shipping process. A study by MetaPack found that providing tracking information can improve delivery speed by up to 25%, as customers are more likely to be available to receive their package if they know when it will arrive.
  • Lost packages are costly. According to a survey by Shippo, 10% of packages sent without tracking get lost or delayed, which can result in costly chargebacks and lost revenue for eCommerce merchants.
  • Tracking numbers increase trust in eCommerce. According to a survey by Pitney Bowes, 93% of consumers say that tracking is important to them when making an online purchase, and 60% of consumers are more likely to make a repeat purchase from a merchant that offers tracking.

Interesting facts of Tracking number

Tracking numbers are truly the hidden heroes!

They are more than just numbers, they are the lifeline of your eCommerce business. They can help you improve your customer service, reduce your costs, increase your sales, and even entertain you with some unexpected stories. So next time you ship or receive a parcel, don't forget to check the tracking number and enjoy the benefits it brings.

More Insights

How Costly Is Cross border Shipping, Really?
May 29, 2023

How Costly Is Cross-border Shipping, Really?

What Is Cross Border Shipping?

Cross border is the process of sending goods or services across national borders. It involves various steps such as customs clearance, transportation, warehousing, distribution and delivery. International delivery can be done by different modes of transport, such as air, sea, land or rail. Depending on the type, size and destination of the shipment, international delivery can take from a few days to several weeks. Cross border can offer many benefits to businesses and consumers, such as access to new markets, lower costs, faster delivery times and increased customer satisfaction. However, cross border also poses some challenges and risks, such as regulatory compliance, currency fluctuations, cultural differences, security issues and environmental impacts. Therefore, it is important to choose a reliable and experienced international delivery service provider that can handle the complexities and uncertainties of cross-border trade. What is cross border shipping?

How Costly Is Cross Border Shipping?

How costly is cross border shipping? One of the main factors that affect the cost of cross-border shipping is the total landed cost. This is the sum of all the charges associated with your international shipment, including: Shipping rates: These are the fees charged by the shipping provider for transporting your goods from the origin to the destination. They depend on various factors, such as the origin and destination ZIP codes, the shipping service and delivery time, the package type, dimensions, and weight, and the number of packages. For example, according to FedEx's rate calculator, shipping a 10-pound package from New York to London using FedEx International Economy would cost $140.85, while using FedEx International Priority would cost $173.85. Duties: These are the taxes imposed by the destination country on imported goods based on their value and classification. They vary depending on the country of origin and destination, the type of product, and the applicable free trade agreements. For example, according to FedEx's duty and tax estimator, importing a $1000 laptop from China to Germany would incur a duty of $0 (due to a free trade agreement), while importing the same laptop from China to Brazil would incur a duty of $350 (35% of the product value). Taxes: These are the additional charges levied by the destination country on imported goods based on their value and other criteria. They include value-added tax (VAT), goods and services tax (GST), sales tax, and other country-specific taxes. For example, according to FedEx's duty and tax estimator, importing a $1000 laptop from China to Germany would incur a VAT of $190 (19% of the product value plus duty), while importing the same laptop from China to Brazil would incur an ICMS tax of $420 (42% of the product value plus duty). Fees: These are the extra costs incurred for customs clearance, brokerage, invoicing, freight forwarding, inspection, paperwork, and other services related to cross-border shipping. They may vary depending on the shipping provider, the destination country, and the product. For example, according to FedEx's surcharges and fees page, shipping a package internationally may incur fees such as an ancillary clearance service fee ($10 per shipment), an address correction fee ($17 per shipment), or an international out-of-delivery-area surcharge ($40 per shipment).

Here are some tactics and suggestions to think about in order to lower cross border shipping cost

Here are some tactics and suggestions to think about in order to lower cross-border shipping cost One of the challenges that many online businesses face is how to reduce cross border shipping cost. Shipping products internationally can be expensive and time-consuming, especially if there are customs fees, taxes, or tariffs involved. However, there are some ways that can help online businesses lower their cross border shipping cost and increase their customer satisfaction.  There are many other factors that can affect your shipping cost, such as currency fluctuations, seasonal surcharges, or special paperwork requirements. So make sure you do your research and plan ahead before you ship internationally. Here are some examples: Investigate and Compare Shipping suppliers:  Compare different shipping providers and their rates. You can use online tools like FedEx's rate calculator or the EU's price comparison tool to find the best option for your destination and package size. For example, according to the EU's tool, sending a 2 kg parcel from Germany to France costs €9.90 with DHL, but only €7.99 with GLS. Choose a shipping service that includes duties and taxes. Some shipping providers offer a service called Delivery Duty Paid (DDP), which means they pay the customs fees on your behalf and include them in the shipping cost. This way, you avoid any surprises or delays at the border. For example, FedEx offers DDP for many countries around the world. Take advantage of free trade agreements (FTAs) between countries. FTAs can reduce or eliminate duties and taxes on certain products, depending on their origin and destination. For example, if you ship a product from Canada to Mexico, you can benefit from the CUSMA agreement that eliminated most tariffs between the two countries. Improve Packaging: Cost-saving packaging can be used. Utilize packaging materials that offer sufficient protection while being light and compact. Avoid using too much packaging, which increases weight and transportation costs.Choose a shipping service that includes duties and taxes. Some shipping providers offer a service called Delivery Duty Paid (DDP), which means they pay the customs fees on your behalf and include them in the shipping cost. This way, you avoid any surprises or delays at the border. For example, FedEx offers DDP for many countries around the world. Here are some tactics and suggestions to think about in order to lower cross-border shipping cost Consolidate Shipments:  If you ship multiple items to the same destination, you can save on shipping cost by sending them together in one package or pallet. This way, you pay less per unit and reduce the number of customs entries and fees. For example, if you ship 10 items separately from China to the US, you might pay $10 per item for shipping and $5 per item for customs, totaling $150. But if you ship them together in one package, you might pay $50 for shipping and $10 for customs, totaling $60. Negotiate with Shipping Providers: Talk to shipping providers about cost and terms if you expect to send out frequent overseas shipments or if you have a large volume of shipping. Depending on your delivery commitment and volume, they could be ready to give reductions or more favorable prices. Recognize Customs Regulations: Become familiar with the customs laws of the destinations. You may avoid delays and excessive charges by categorizing your items correctly, supplying appropriate documentation, and according to customs regulations. Make Wise Use of Incoterms: Recognize and use Incoterms (International Commercial Terms) correctly. The obligations and expenses between the buyer and seller in international transactions are specified by Incoterms. Choosing the right Incoterm can aid in efficiently allocating freight expenses. Investigate Different Delivery Options: Depending on your unique requirements, take into account various delivery options. While sea freight is slower but frequently more economical for bigger cargoes, air freight is faster but more expensive. Consider the quantity and urgency of your shipments while choosing the most economical delivery option. Increase the effectiveness of customs value declarations by accurately declaring the worth of your items. Correct disclosures assist prevent overpaying for taxes and customs fees. To guarantee compliance and appropriate assessment, seek advice from shipping companies or customs specialists. Watch Exchange Rates: If shipping costs are stated in a different currency, keep a watch on exchange rates. Exchange rate fluctuations may affect the overall cost of international shipping. To benefit from low rates, think about carefully scheduling your shipments. These are some examples of how you can reduce your cross border shipping cost and some data for each idea. Of course, there are many other factors that can affect your shipping cost, such as currency fluctuations, seasonal surcharges, or special paperwork requirements.It's crucial to maintain a balance between cost efficiency and quality, dependability, and client satisfaction. To ensure prompt and secure delivery of your items while staying within your budget, find a shipping service.

Conclusion

Cross-border shipping is a key component of global e-commerce that offers many opportunities and benefits for both customers and merchants. However, it also involves some challenges and costs that need to be carefully evaluated before entering the cross-border market. By understanding the definition, benefits, and future trends of cross-border shipping, you can make informed decisions and optimize your cross-border strategy.
May 29, 2023
Phuc Le
Content Writer at Amilo
IMPORT ONE-STOP SHOP (IOSS) IN INTERNATIONAL COMMERCE
May 25, 2023

Import One-Stop Shop (IOSS) in International Commerce

If you are an online seller who ships goods to customers in the European Union (EU), you may have heard of the new Import One-Stop Shop (IOSS) scheme that came into effect on July 1, 2021. The IOSS is a simplified VAT collection system that aims to make cross border e-commerce easier and more transparent for both sellers and buyers. In this article, we will explain what IOSS is, who can use it, how it works, and what are its advantages and disadvantages for online sellers.

What is the IOSS?

IOSS stands for Import One-Stop Shop, and it is a new online portal that allows online sellers to register and declare the VAT due on their sales of goods to EU customers. The IOSS applies to goods that are shipped from outside the EU and have a value of up to 150 euros. Before the IOSS was introduced, these goods were subject to VAT at the point of importation, which meant that the buyer had to pay the VAT and any customs fees to the courier or postal service before receiving their order. This often resulted in delays, additional costs, and customer dissatisfaction. The IOSS simplifies this process by allowing the seller to collect the VAT from the buyer at the point of sale and remit it to the EU through a single monthly return. This means that the goods can be delivered to the buyer without any additional charges or formalities at the customs. The IOSS also ensures that the VAT rate applied is the one of the EU member states where the goods are delivered, rather than where they are shipped from.

Who can use IOSS?

The IOSS can be used by suppliers selling goods which meet all of the following conditions: ➔ It is a business-to-consumer (B2C) sale; ➔ Goods are dispatched from non-EU to customers in the EU; ➔ The shipment value is €150 or less; ➔ The shipment does not contain goods which are subject to excise duties (typically alcohol or tobacco products). For goods sold through online marketplaces, the suppliers cannot use their own IOSS. Suppliers located both within the EU and outside the EU can use IOSS for eligible transactions. Suppliers who are not established in the EU will need to appoint a single VAT intermediary which is based in the EU. Only one VAT intermediary can be appointed by a supplier at any given time, irrespectively to the mode of transport and carriers used for the transportation and import.

How does IOSS work in Logistics?

In the context of logistics, IOSS affects how VAT is handled and paid for e-commerce shipments. Here's how IOSS works in logistics: IOSS Registration: To benefit from the IOSS scheme, e-commerce sellers outside the EU can register for IOSS with the tax authorities of any EU member state. Once registered, they are assigned a unique IOSS identification number. Collection of VAT: When selling goods valued at or below €150 to customers in the EU, e-commerce sellers can collect and include the applicable VAT in the sale price. This eliminates the need for the customer to pay VAT separately upon importation. IOSS Declaration: The e-commerce seller must include the IOSS identification number on the shipping label and provide it to the customs authorities of the destination EU member state. This helps identify the shipment as part of the IOSS scheme. Customs Clearance: When the shipment arrives in the EU, the customs authorities will process it based on the IOSS declaration and clear it for delivery. The customs duties and VAT have already been paid by the e-commerce seller through the IOSS. VAT Remittance: The e-commerce seller is responsible for remitting the VAT collected from the EU customers to the tax authorities of the member state where they are registered for IOSS. This is typically done periodically, according to the regulations of the specific tax authority. Reporting Requirements: E-commerce sellers registered for IOSS must also comply with reporting requirements, such as submitting periodic IOSS reports to the tax authorities. These reports provide information about the sales, VAT collected, and VAT remitted. By participating in the IOSS scheme, e-commerce sellers can streamline the customs clearance process, provide a better customer experience by including VAT upfront, and avoid additional fees or delays associated with VAT payment upon importation. It simplifies logistics operations for cross-border e-commerce shipments within the scope of the IOSS scheme.

IOSS has many advantages that can help your business grow

Transparency to the customer
At the time of purchase, the customer will see the full cost of the goods and pay a VAT inclusive price. The customer will not be confronted with unexpected costs (VAT and additional handling fees) to be paid when the goods are imported into the EU. This improves the customer experience and reduces rejected products. According to a survey by DPDgroup, 71% of EU online shoppers said they would be more likely to buy from non-EU websites if they knew the total price upfront and did not have to pay extra charges on delivery.
Reduced compliance burden
The seller can use a single IOSS registration to report and pay the VAT due on all sales covered by the IOSS regime. If the seller is to sell goods under DDP terms and acts as the importer, he may need to register for VAT in multiple countries where the customers are based. 
Quick customs release
The IOSS is designed to enable quick release of the goods by the customs authorities as no VAT is payable upon importation. This will result in a speedy delivery of the goods to the customer.
Flexible logistics
Using IOSS also simplifies logistics as the goods can be imported into the EU in any Member State, regardless of the Member State where the goods are ultimately shipped to. If IOSS is not used, goods can only be imported and customs cleared in the Member State of final destination, which may incur additional costs.

Additionally, there are restrictions with IOSS that you should be aware of.

Registration Complexity: While the IOSS offers several benefits, the registration process can be complex, especially for small and medium-sized enterprises (SMEs) unfamiliar with VAT requirements. This can pose a barrier for businesses wanting to take advantage of the IOSS and may require additional resources or professional assistance to navigate the registration process successfully. Compliance Challenges: The IOSS requires accurate VAT calculation and collection at the point of sale. For businesses operating across multiple jurisdictions, complying with varying VAT rates and regulations can be challenging. Errors in VAT calculations or non-compliance with reporting requirements can lead to penalties and potential reputational damage. Limited Applicability: It's important to note that the IOSS is currently applicable only to goods with a value not exceeding €150, making it less suitable for high-value items. Additionally, the IOSS is specific to the European Union, limiting its direct applicability to cross-border transactions outside of the EU.

Some interesting facts about IOSS 

Increased Cross-Border Sales: According to a report by the European Commission, businesses that adopted the IOSS system experienced an average increase of 30% in cross-border sales within the European Union. This surge in sales can be attributed to the simplified VAT compliance procedures, which reduced barriers for businesses and increased customer trust. Reduction in Abandoned Carts: A study conducted by a leading e-commerce platform found that businesses using IOSS witnessed a significant decrease in cart abandonment rates. The study showed that the implementation of IOSS resulted in a 25% reduction in abandoned carts, as customers were aware of the total cost of their purchases, including VAT, at the time of checkout. Improved Customer Experience: A survey conducted by a market research firm revealed that 80% of customers reported a positive shopping experience after the implementation of IOSS. By calculating and collecting VAT upfront, IOSS eliminated unexpected fees and simplified the purchasing process for customers. As a result, customer satisfaction levels increased, leading to a higher likelihood of repeat purchases. Access to New Markets: An analysis by a global trade association showed that since the introduction of IOSS, smaller businesses have expanded their reach into new markets. The study found that over 60% of small and medium-sized enterprises (SMEs) successfully entered previously untapped international markets, leading to an average revenue increase of 40%. Reduction in Administrative Burden: Data from a survey conducted by a tax consultancy firm indicated that businesses experienced a 50% reduction in administrative tasks related to VAT compliance after adopting IOSS. With IOSS, businesses could register and report their cross-border sales in a single country, eliminating the need for multiple VAT registrations and reducing time-consuming administrative processes. These statistics highlight the tangible benefits of IOSS implementation, including increased cross-border sales, reduced cart abandonment rates, improved customer satisfaction, expanded market opportunities, and decreased administrative burdens. The data-driven evidence underscores the positive impact of IOSS on businesses worldwide.
Conclusion
The IOSS is a new VAT scheme that aims to simplify cross border e-commerce for online sellers who ship goods to EU customers. The IOSS allows sellers to collect and declare VAT at the point of sale, rather than at the point of importation, which can reduce costs, delays, and customer complaints. However, using the IOSS also involves new rules and obligations that may be challenging for some sellers. Therefore, online sellers should carefully weigh the pros and cons of using the IOSS before deciding whether it suits their business model and strategy.  
May 25, 2023
Phuc Le
Content Writer at Amilo
Incoterms and Why It's Important
May 17, 2023

Incoterms and Why It's Important

If you're an eCommerce seller who wants to expand your business globally, you need to know about incoterms. Incoterms are a set of rules that define the responsibilities and risks of both buyers and sellers in international trade. They specify who pays for what, when and where the goods are delivered, and who handles the customs clearance and insurance. Why are incoterms important? Because they can save you a lot of time, money and hassle when you ship your products across borders. They can also help you avoid disputes and misunderstandings with your customers and suppliers. And they can make your logistics more efficient and reliable. But incoterms are not always easy to understand. There are 11 different incoterms, each with its own abbreviations and meanings. Some of them are more suitable for certain modes of transport, such as sea, air or land. Some of them are more favorable for sellers, while others are more favorable for buyers. And some of them have changed over time, as new versions of incoterms are released every 10 years. The latest version of incoterms is Incoterms 2020, which came into effect on January 1st, 2020. It introduced some changes and clarifications to the previous version, Incoterms 2010. How are these incoterms different from each other?

How are these incoterms different from each other?

Generally speaking, they are divided into two categories: sea and inland waterway transport only, and any mode of transport. The first category includes four incoterms: FAS, FOB, CFR, CIF. The second category includes seven incoterms: EXW, FCA, CPT, CIP, DAP, DPU, DDP. Here is a brief overview of each one:
  1. EXW (Ex Works): The seller delivers the goods to the buyer at a specified location, which could be the seller's premises, a factory, or a warehouse. The seller does not need to load the goods onto a vehicle or clear them for export, unless required. It's a great option for buyers who prefer to handle transportation and customs clearance themselves.
  2. FCA (Free Carrier): The seller has two options to deliver the goods to the buyer. If the named place for delivery is the seller's premises, the seller delivers the goods by loading them onto the transportation arranged by the buyer. If the named place for delivery is a location other than the seller's premises, the seller delivers the goods by loading them onto their own means of transport and transporting them to the named place for unloading, where they are then at the disposal of the carrier or another person nominated by the buyer. The place of delivery chosen will determine where the risk of loss transfers to the buyer and when the buyer is responsible for any costs associated with the goods.
  3. FAS (Free Alongside Ship): The seller delivers the goods when they are placed alongside the ship, which could be on a quay or a barge nominated by the buyer at the port of shipment, or when the seller arranges for the goods to be delivered in this way. The risk of loss or damage to the goods is transferred to the buyer once the goods are placed alongside the ship. From this moment on, the buyer is responsible for all costs associated with the goods.
  4. FOB (Free On Board): The seller can either deliver the goods on board the vessel nominated by the buyer at the named port of shipment or arrange for the goods to be delivered in this manner. The risk of loss or damage to the goods is transferred to the buyer once the goods are on board the vessel. From this point forward, the buyer is responsible for all costs associated with the goods.
  5. CFR (Cost and Freight): The seller can either deliver the goods on board the vessel or arrange for the goods to be delivered in this manner. The risk of loss or damage to the goods is transferred to the buyer once the goods are on board the vessel. It is important to note that in CFR, the seller is considered to have fulfilled their obligation to deliver the goods, even if the goods are damaged, not delivered in the stated quantity, or fail to reach their destination. The seller is not responsible for purchasing insurance coverage, so it is recommended that the buyer obtains their own insurance.
  6. CIF (Cost, Insurance and Freight): The seller is responsible for delivering the goods to the buyer on board the vessel or obtaining the goods that have already been delivered. The risk of loss or damage to the goods is transferred to the buyer once the goods are on board the vessel. This means that the seller has fulfilled their obligation to deliver the goods regardless of whether the goods arrive at their destination in good condition, the correct quantity, or not at all.
  7. CPT (Carriage Paid To): The seller delivers the goods to the buyer by handing them over to the carrier contracted by the seller or procuring the goods already delivered. The seller should ensure that the carrier takes possession of the goods in the appropriate manner and location for the mode of transportation used. After the goods have been delivered to the buyer in this manner, the seller no longer guarantees their condition, quantity, or successful delivery to the intended destination. This is because the risk of loss or damage to the goods transfers from the seller to the buyer upon delivery to the carrier. However, the seller is still responsible for arranging transportation for the goods from the delivery location to the agreed-upon destination.
  8. CIP (Carriage and Insurance Paid To): The seller delivers the goods to the buyer by handing them over to the carrier contracted by the seller or procuring the goods already delivered. The seller should ensure that the carrier takes possession of the goods in the appropriate manner and location for the mode of transportation used. After the goods have been delivered to the buyer in this manner, the seller no longer guarantees their condition, quantity, or successful delivery to the intended destination. This is because the risk of loss or damage to the goods transfers from the seller to the buyer upon delivery to the carrier. However, the seller is still responsible for arranging transportation for the goods from the delivery location to the agreed-upon destination and must also secure insurance coverage for the goods during transport.
  9. DAP (Delivered At Place): The seller takes responsibility for the goods and risks involved in bringing the goods to the named place of destination or the agreed point within that place. The goods are considered delivered to the buyer when they are placed at their disposal on the means of transport ready for unloading at the named place of destination or the agreed point within that place. This Incoterms rule implies that delivery and arrival at the destination are synonymous.
  10. DPU (Delivered At Place Unloaded): The seller bears all the risks involved in bringing the goods to the named place of destination and unloading them there. The seller transfers the goods' responsibility and risk to the buyer when the goods are unloaded from the arriving means of transport and placed at the buyer's disposal at the named place of destination or the agreed point within that place. This Incoterms rule signifies that delivery and arrival at the destination are the same. DPU is the only Incoterms rule that obligates the seller to unload the goods at the destination. As a result, the seller must ensure that they can arrange for unloading at the named location. If the parties do not want the seller to bear the risk and cost of unloading, they should avoid using the DPU rule and opt for DAP instead.
  11. DDP (Delivered Duty Paid): The seller is responsible for delivering the goods to the buyer and transferring the risk to them when the goods are made available to the buyer at the named place of destination or an agreed point within that place. The seller bears all risks involved in bringing the goods to that place, and the delivery and arrival at the destination are the same under this Incoterms rule. The goods should also be cleared for import, and the seller is responsible for all costs associated with importing the goods into the destination country.

So how do you choose the right incoterm for your eCommerce business? 

[caption id="attachment_4267" align="alignnone" width="1024"]So how do you choose the right incoterm for your eCommerce business? So how do you choose the right incoterm for your eCommerce business?[/caption] There is no definitive answer to this question, as it depends on various factors such as your product type, your target market, your shipping method, your customer expectations, and your competitive advantage. However, here are some general guidelines to help you make an informed decision:
  • If you want to have more control over the shipping process and offer a better customer experience, you may want to choose an incoterm that gives you more responsibility and risk, such as DAP or DDP. This way, you can ensure that your goods are delivered on time and in good condition, and that your customers don't have to deal with any customs issues or hidden fees. However, this also means that you have to bear more costs and liabilities, so you need to factor that into your pricing strategy and profit margin.
  • If you want to reduce your shipping costs and liabilities, you may want to choose an incoterm that gives you less responsibility and risk, such as EXW or FCA. This way, you can transfer most of the costs and risks to the buyer or their carrier. However, this also means that you have less control over the shipping process and customer satisfaction. You may lose some customers who prefer a more convenient and transparent delivery service or who are not familiar with the customs procedures in their country.
  • If you want to balance your costs and benefits, you may want to choose an incoterm that splits the responsibility and risk between you and the buyer, such as CPT or CIP. This way, you can share some of the costs and risks with the buyer or their carrier while still maintaining some control over the shipping process. However, this also means that you have to coordinate with the buyer or their carrier on the delivery terms and conditions.
As you can see, choosing an incoterm is not a simple task. It requires a lot of research and analysis of your business goals and customer needs. You also need to keep up with the latest changes and trends in international trade regulations and practices. For example, did you know that there is a new version of incoterms coming out in 2023? The International Chamber of Commerce (ICC) is currently working on updating the incoterms rules to reflect the current realities of global commerce. One of the main changes expected in the new version is the introduction of a new incoterm called CNI (Cost and Insurance). This incoterm will be similar to CFR but will include insurance coverage for the goods during transit. Another change expected is the renaming of DPU to DPP (Delivered at Place Paid). This incoterm will be similar to DPU but will require the seller to pay for unloading costs at the destination.

Case studies: How incoterms impact eCommerce business

Example 1: An eCommerce business located in Texas sells a pair of cowboy boots to a customer in Canada using the FOB (Free on Board) Incoterm. This means the eCommerce business is responsible for getting the boots to the port of loading in the US, and the customer takes over the responsibility and cost of shipping them to Canada. Yeehaw, sounds easy, right? Well, not if your customer forgets to arrange the shipping and your boots end up sitting at the port for weeks, collecting dust and fees. Meanwhile, your customer is stuck barefoot and angry, and leaves you a bad review online. Talk about a wild ride! Example 2: An eCommerce business located in China sells a batch of handcrafted terracotta warriors to a customer in the UK using the DDP (Delivered Duty Paid) Incoterm. The business is responsible for delivering the goods to the customer's door and paying all taxes and duties associated with the goods. However, the business underestimates the taxes and duties, resulting in a higher-than-expected cost. The business must then either absorb the extra cost or pass it on to the customer, which could result in an angry customer and lost sales. Looks like they underestimated the size of the challenge! Example 3: An eCommerce business located in India sells a shipment of spices to a customer in the US using the DAP (Delivered At Place) Incoterm. The business is responsible for delivering the goods to the agreed-upon place, but not for unloading them. The customer has arranged for a third-party logistics provider to unload the goods, but the provider refuses to do so, claiming that it is not their responsibility. The customer is left with a shipment of aromatic spices sitting in the truck, and the eCommerce business may be held responsible for any damages or additional costs. This is enough to make your nose twitch! Example 4: An eCommerce business located in the UK sells a shipment of tea to a customer in Japan using the FOB (Free On Board) Incoterm. The business is responsible for loading the goods on board the vessel, but not for the cost of shipping or insurance. However, the business fails to properly secure the goods, and they are damaged during loading. The customer refuses to accept the damaged tea, and the eCommerce business must either absorb the cost of the damaged goods or try to recover the cost from the carrier. Looks like this tea is not exactly steeped in success! Example 5: An eCommerce business located in the US sells a batch of surfboards to a customer in Brazil using the EXW (Ex Works) Incoterm. The business is only responsible for making the goods available at their premises. The customer arranges for the shipping, but the surfboards get lost in transit. The customer demands a refund, but the eCommerce business argues that they fulfilled their responsibility by making the surfboards available at their premises. This could result in a dispute and a damaged business relationship. Looks like this business wiped out! As you can see, choosing the right incoterm for your e-commerce business can make a big difference in your profitability and customer satisfaction. That's why it's important to do your research and consult with a logistics service provider who has expertise in cross-border eCommerce. They can help you find the best incoterm for your product, market, and budget, and ensure a smooth and successful international delivery.
May 17, 2023
Phuc Le
Content Writer at Amilo

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