How to speak like a cross-border entrepreneur

Just when you thought you had all that ecommerce jargon and all those shipping acronyms down pat, you decide to take your ecommerce business global—or at least across the border to your north or south. Now you have incoterms, ePackets and DDPs to contend with. Becoming fluent in international trader speak is a great first step in your cross-border journey.

Wed Aug 04 13:01:00 EDT 2021
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Cross-border ecommerce terminology 

Brexit
Brexit, a combination of “Britain” and “exit”, is shorthand for the proposal that led to Britain leaving the European Union (EU). Prior to Brexit, British businesses moved goods to and from participating EU counties without taxes or tariffs. Leaving the EU has removed the UK from the EU free trade zone, but has freed Britain to create its own trade agreements with other countries, including those in the EU.

Broker
A broker, or more specifically a customs broker, is a person or firm hired by an ecommerce provider to clear shipments of their goods through customs. A broker is responsible for ensuring that all customs regulations and laws are met, all taxes and fees are paid and all documentation is completed.

Commercial invoice
A commercial invoice is a legal document issued by an ecommerce seller to a cross-border customer. Serving as both a binding contract and a proof of sale, it includes details about the cost, value and quantity of the items sold. The details in the commercial invoice are also used to calculate and assess duties and taxes during the customs clearance process.

Customs clearance
Customs clearance is the process of moving goods through a country’s customs agency. During clearance, a customs officer examines the required paperwork, calculates duties and taxes and clears the shipment for delivery once the paperwork is approved and all fees are paid.

Denied third party screening
Denied third party is a list of the regions, organizations and individuals that the US has identified as entities you’re not allowed to do business with—for example, terrorist organizations or sanctioned individuals. During a denied third party screening, an ecommerce retailer’s partners, suppliers, vendors and customers are compared with the names on the list. Every cross-border transaction must be screened to ensure it complies with the list.

DDP (Delivered Duty Paid)
This delivery agreement states that the seller is responsible for all shipping costs, duties, taxes, insurance and any other expenses associated with a cross-border shipment. Some online merchants include all customs charges as part of a customer’s total shipping costs.

DDU (Deliver Duty Unpaid)
This delivery agreement states that the customer is responsible for all customs duties and taxes before the shipment is released from customs and delivered. This option saves the seller some upfront costs but poses the risk of surprising customers with unexpected fees.

De minimis
A de minimis is the highest monetary value a cross-border order can reach before it’s subject to customs duties and taxes. The de minimis threshold is determined by the destination country and is intended to make lower-value transactions faster, easier and more predictable.

Duty
A duty is a tax imposed on a cross-border customer and collected as part of the customs process. Duties are dictated by the destination country and are usually based on the value, weight and dimensions of the shipment. Online merchants often pay a customer’s duties as part of a DDP agreement.

Duty drawback
A duty drawback is a refund of the duties, taxes and fees paid when you sell and ship an item cross-border that you purchased from another country, or what a seller can recoup when an item is returned by a buyer in another country. Duty drawback helps ensure that a seller isn’t taxed twice for the same item.

ePacket
ePacket is a shipping option offered by third-party logistics providers (3PL) for packages under 4.4 lbs and products valued at under $400. The USPS® first introduced ePacket shipping and delivery in 2011 as a new service that allows lightweight packages from Hong Kong and China to receive USPS First-Class Mail® shipping and tracking services. ePacket has grown to include over 40 regions.

Free trade agreements
A free trade agreement details the rules, regulations and practices two or more countries agree to follow concerning trade. They are intended to encourage the free flow of goods and services between participating countries by reducing or even eliminating tariffs.

GST (Goods and Services Tax)
GST is a 5% sales tax imposed on most goods and services purchased in Canada. Every province in Canada charges GST, either separately or as a part of the harmonized sales tax (HST).

HST (Harmonized Sales Tax)
In many Canadian provinces, HST combines the national GST with provincial sales taxes (PST) to create one “harmonized” sales tax.

HTS (Harmonized Tariff Schedule)
The HTS is used globally to determine tariff classifications for imported goods based on their material composition, product name and/or intended function. Nearly every good that is imported around the world, including the US, is classified by its own 8-digit code. The HTS also determines the duties applied to each code. It’s a critical component of the commercial invoice that is required to comply with customs requirements.

Incoterms
Incoterms® are a set of 11 internationally recognized rules that define the responsibilities of sellers and buyers for the cross-border sale of goods. They are intended to help clarify the tasks, costs and risks for sellers and buyers and eliminate costly mistakes in cross-border transactions. DDP and DDU are two frequently referenced incoterms used by ecommerce sellers.

IOSS (Import One Stop Shop)
The Import One-Stop Shop (IOSS) is the electronic portal ecommerce sellers use to comply with their VAT obligations when selling to customers in the EU. The IOSS allows sellers of imported goods to buyers in the EU to collect, declare and pay the VAT for their customers. VAT rates can be included as a delivery options available to your customers at checkout.

KYC (Know your customer)
KYC is a process that ecommerce businesses use to verify the identity of customers in India. The Indian Customs authorities are especially vigilant about KYC regulations and require KYC documentation regardless of an item’s value. KYC is intended to prevent money-laundering and bribery schemes.

Product description 
A detailed product description is required for commercial invoices and other cross-border documents. A good description should include exactly what the item is, what it’s made of and what it’s used for. The more accurate and detailed your description is, the more likely it is to sail through customs.

PST (Provincial Sales Tax)
PST is a retail sales tax that applies to goods and some services in many Canadian provinces. Several provinces have combined their provincial sales taxes with the federal Goods and Services Tax (GST), creating a single Harmonized Sales Tax (HST).

Tariff
A tariff is a direct tax imposed by governments on specific classes of goods, primarily imports. The harmonized tariff (HTS) schedule codes include the tariff rates that customers will be charged for specific products. Some online merchants include all tariffs as part of a customer’s total shipping costs.

Taxes 
Import taxes like duties and tariffs are government fees placed on the cross-border purchase of goods. Some online merchants include all import-related taxes as part of a customer’s total shipping costs.

Total landed cost
Total landed cost is the overall price of a product once it has “landed” at a buyer’s door. It includes the price of the product, as well as all duties, tariffs, taxes, shipping, handling and any other costs. Many ecommerce sellers include the total landed cost as a shipping option at checkout.

UPU (Universal Postal Union)
The UPU is a United Nations agency whose mission is to improve postal service around the world. It sets the rules for the exchange of international mail and makes recommendations to stimulate the growth of mail, parcel and financial services.

USMCA (United States-Mexico-Canada Agreement)
The United States-Mexico-Canada Agreement replaced NAFTA as the free trade agreement between the United States, Mexico and Canada. It details new regulatory changes to labor, the environment, macroeconomics, digital trade and, most importantly for ecommerce, the fees and paperwork associated with shipping cross-border.

VAT (Value Added Tax)
VAT is a tax placed on almost all goods and services sold. It can be levied at each stage of the supply chain if some type of value is added to a product. VAT rates are calculated based on the price of the item being sold.

Talk the talk with an expert

You might be able to speak like an international trader now, but it never hurts to talk with a real expert. With decades of global shipping experience, Pitney Bowes can help you cut through the jargon and guide your ecommerce business through the ins and outs of cross-border sales.