International trade has been a bit slow of late due to the COVID-19 hangover and the Russia-Ukraine war. It has been fraught with challenges, necessitating the need to look for a way to overcome trade hindrances posed by a variety of logistics, regulatory, and market-based aspects.
With that said, according to the World Trade Organization, it is estimated that global trade will grow slowly at a rough rate of 1%. Logistics and trade partners need to deliberate on how to overcome cross-border trade challenges in order to give the global economy some respite from the recent headwinds.
Listed below are the common challenges in cross-border trade and some solutions and tips that can be used to overcome them.
9 Common Challenges in Cross-Border Shipping
In addition to the supply chain taking massive hits because of the pandemic and the war recently, international shippers have been facing nine major challenges in their cross-border operations, as detailed below.
1. Customs Compliance
Customs compliance is a matter of national security. Especially in North America, the government is extremely particular about the kind and quality of goods changing borders to protect the health and safety of its citizens.
One of the major challenges that international shippers face is maintaining customs compliance with all the mandates laid out for various types of goods.
Ignorance of these laws or failure to comply with them gets the freight confiscated or held up at the borders, creating downstream troubles. Shippers may even face penalties and prison time if these laws are not complied with, making it that much more challenging to get things right.
2. Documentation Inefficiencies
Cross-border trade comes attached with heavy documentation requirements. For example, you need to send the FDA Prior Notice to import items that are controlled by the FDA, or articles that qualify for de minimis under Section 321 need to have their own documentation and entries.
Many international traders do not have standardized processes to manage the paperwork and documentation beforehand, making it difficult to get clearance for imports lined up at the borders. This causes delays in shipments and countless other hassles.
3. HTS Tariffs
The HTS tariff system outlines the “fee” or a kind of “tax” that governments charge businesses to permit the sale of their products or services in their country.
The HTS tariff system has been quite the challenge for shippers, especially between Mexico – Canada – United States, as this system has the potential to be misused for political causes.
However, with the announcement of the USMCA (United States–Mexico–Canada Agreement), shippers in these countries can hope for a better movement of goods between the borders.
It is inevitable that cross-border shipments are stopped for examination at random. In such cases, broker effectiveness plays a crucial role in speeding up the inspection process at check posts and facilitating coordination with the officials to ensure that delays remain at the minimum.
Furthermore, the fleet of drivers that your logistics partner provides all need to have a valid passport or other approved travel document and necessary commercial documentation to show the merchandise in the vehicles. Unless these processes can be expedited, international shipments will face delays.
This is a challenge, especially for bulk importers like eCommerce companies. It is difficult to track and monitor the movement and status of goods across borders and keep up with the associated compliances, liabilities, duties, and taxes.
Inefficiency in these processes ultimately leads to delays in the delivery timeframe for the consumers. Furthermore, a multicarrier setup and handoffs across borders can potentially cause delays at the changing point if proper documentation and paperwork are not prepared prior.
6. Customer Dynamics
It is a well-known fact that the customer of today expects their journey with a commerce platform to be as seamless as shopping from a physical store. Add to that the trouble of cart abandonment and stagnant inventories, and you have a problematic warehousing process and inefficient supply chain.
Unless the local operations of your international trade are synchronized with robust checkout, inventory management, and regulatory compliance for international trade, the customer-centric challenges will not go away.
Shippers partnering with brands that are ambitious and aiming to go international may face troubles with route-to-market strategies and other logistical issues.
Given that such brands often invest in advertising and marketing, it can be expected that the trade partner is expected to deliver on that front and fill the gaps.
While this may not be a problem for the shipper per se, the brand timelines and requirements may not necessarily be in line with the shippers.
Especially for Direct-to-Consumer brands, it is absolutely essential to be transparent with all the applicable taxes and duties that the customers would be required to shoulder when the items arrive at the border.
Since certain taxes depend on package weight and type, it can become difficult to provide price accuracy to customers. Shippers may need to implement a solution that includes item HTS classification and calculations for all applicable taxes and duties for the destination country to prevent surprise charges.
Returns are the most complex part of operating commerce from across borders. This is primarily because the cross-border process for returns comes with duty and tax implications that differ for goods that are going out of rather than coming into a country.
Profitability becomes doubtful when a business cannot strike the right balance between the cost of returning goods and customer demands. There is the provision of double duty payment for returned goods relief, but there is a need to partner with an intermediator who can facilitate the process.
In addition to the hindrances to international trade discussed above, there are a few other concerns that make it hard for international shippers to carry out their business.
The capacity crunch is causing bottlenecks in supply chains in addition to shortages in shipping containers. Furthermore, the customer-side demands aren’t easing out, which is adding to the challenges shippers face with demand volumes and supply problems.
Helpful Tips and Solutions to Ease Cross-Border Shipping Operations
The only way to overcome the challenges is to go through them. Listed below are a few tips and solutions you can consider to make the international shipping process more streamlined.
1. Always Plan Ahead
It helps to have a fair prediction of what your import volume is going to look like and make preparations ahead of time.
Mobilize your logistics operations, prepare the paperwork, calculate all the taxes and duties beforehand, and check for customs compliance. Dedicate a team or software to manage all the customs-related operations for expedited shipments.
2. Don’t Rely on a Single Mode of Transport
It could prove to be a massive disadvantage if you only rely on one mode of transport to transport your shipments.
In case freighters get held up, or a contingency arises at the airports, there should be a Plan B to move your goods using other means.
3. Leverage Technology
Especially where tracking and monitoring the supply chain health and customs compliance is concerned, dedicated software can make all the difference.
A comprehensive customs compliance platform like Customs City can help you streamline all the import-related documentation and intricacies to reduce the cycle time and complications of the process.
4. Foster Long-Term Partnerships
One of the key aspects of achieving high efficiencies in cross-border shipments is maintaining healthy business relationships with efficient shippers or other business partners. It helps ensure that consistency is maintained across all movements of your goods.
How Customs City Can Help
A robust customs compliance platform that focuses on connecting international traders with CBP and CBSA, Customs City’s interface lets trade participants achieve monumental efficiencies in their shipping operations revolving around customs clearance requirements.
Some of the most notable features of the CustomsCity Global Solutions Platform include:
- eCommerce clearance service
- Section 321 customs entry
- FDA prior notice
- CBP Freight Status Notification system
- Customs compliance consulting
- Importer Security Filing (ISF)
- Type 86
Countless other features associated with goods import make this platform a comprehensive solution to ease your customs clearance process.
Any global phenomenon that affects the masses also impacts cross-border trade. The most telling example the world has seen recently is the total stop that was put to global commerce by the pandemic.
While businesses are still recovering from the slow-down they have experienced, there is hope for improved growth if logistics challenges can be managed using technology, industry best practices, efficient processes, and fruitful business partnerships.
On the technology front, Customs City has international trade participants covered in the aspects of customs compliance. To understand how our solution can help streamline your trade process, get in touch with us today.