The COVID-19 pandemic saw an acceleration in an already digitally trending trade landscape. E-commerce giants and emerging startups alike continue to seize the opportunities the online market presents.
“In 2024, retail e-commerce sales are estimated to exceed 6.3 trillion U.S. dollars worldwide, and this figure is expected to reach new heights in the coming years,” says Statista. “Internet sales have played an increasingly significant role in retailing. In 2023, e-commerce accounted for over 19 percent of retail sales worldwide. Forecasts indicate that by 2027, the online segment will make up close to a quarter of total global retail sales.”
Still, the global e-commerce environment presents a web of red tape and challenges for importers and exporters to navigate. How can e-commerce companies prioritize cross-border compliance? Let’s outline some of the heftiest compliance challenges e-commerce competitors face, along with insights on how to surmount them. First, let’s highlight why compliance in e-commerce is so critical.
E-commerce Legal Requirements
The digital trade environment is challenging to regulate. However, many laws govern the trade of goods across borders. These laws vary by region and change over time but aim to protect consumers and prevent illegal transactions. Traders are responsible for being informed of and complying with all relevant e-commerce regulations.
“E-Commerce shipments pose the same health, safety, and economic security risks as containerized shipments, but the volume is higher and growing,” explains U.S. Customs and Border Protection (CBP). “Additionally, transnational criminal organizations are shipping illicit goods to the United States via small packages due to a perceived lower interdiction risk and less severe consequences if the package is interdicted. Furthermore, new or infrequent importers often possess less familiarity with U.S. customs laws and regulations, which can lead to the importation of non-compliant goods.”
Given non-compliance risks, importers and exporters need to have an in-house compliance program before fulfilling their first order. A compliance program is backed by senior management and includes internal policies to ensure all trade regulations are kept, and best practices are employed at every stage of the import/export lifecycle.
Now, let’s zoom in on various compliance challenges e-commerce organizations face.
International Trade Challenges for E-commerce Companies
Consider just four challenges e-commerce traders grapple with:
1. Selecting the Right Markets & Trade Partners
Before entering a market and choosing overseas trade partners, it’s important to do your due diligence and make careful selections. Conduct thorough risk assessments, evaluating the risks involved with the country, buyer, brokers, shippers, and any other potential partners.
“Investigate the political, economic, and financial conditions of the market,” advises the International Trade Administration. “Carefully select partners and buyers to ensure a successful and profitable relationship.”
Exporters should conduct thorough screening to ensure they are not engaging in business with any sanctioned countries or denied parties. These measures will help traders avoid non-compliance risks, including legal repercussions, financial losses, and reputational damage.
2. Understanding Global Trade Regulations
E-commerce regulations vary by country and even by transaction. Applicable laws and licensing requirements hinge on the country of origin, destination, product in question, quantities, end user, and many other transactional details. Traders bear responsibility for understanding and complying with all relevant regulations.
Accurate product classification and thorough license screening are two compliance cornerstones. Traders must understand the nature of the item(s) they intend to sell and apply for any necessary licenses or permits before shipping it to the destination.
Additionally, traders benefit from being aware of provisions such as Free Trade Agreements (FTAs), Free Trade Zones (FTZs), and duty drawbacks so they can leverage the profitability of these opportunities.
3. Managing Cross-Border Logistics Compliance
International shipping compliance is key for any e-commerce company. Fulfilling an order is much more than simply packaging an item and dropping it off at an international courier.
Before shipping, the products must first be prepared to meet regulatory standards, including labeling, proper certification, adherence to environmental and operational standards, and more. Beyond that, traders need to connect with legitimate brokers and reputable couriers. Some shipments require special handling or other unique compliance considerations. Preparing and keeping a record of complete documentation at every step is a must.
4. Furnishing Accurate & Complete Information for Customs Clearance
Navigating customs challenges in e-commerce hinges on compliance awareness, preparation, and documentation. Complete information and necessary authorizations must be furnished to customs authorities to ensure smooth border crossings and accurate duty calculation.
According to CBP’s E-Commerce Elements of Compliance guide for importers to the U.S., here’s the shipment information traders need to furnish to meet basic customs clearance requirements:
- A detailed product description
- The value or listing price of the item (in U.S. dollars)
- The number of items in the package
- The gross weight of each item (kilograms or pounds)
- The country of origin (marked on products in English)
- Other relevant agency requirements, such as licenses, permits, etc.
Of course, requirements vary by country and transaction. Traders must comply with all regulations relevant to their transactions.
Still, this small handful of e-commerce compliance challenges barely scratches the surface. What can help e-commerce companies manage operations?
Solutions for Cross-Border E-Commerce
What if there was a neat solution for all of the aforementioned problems? Thankfully, there is. Meet Global EASE, OCR’s global trade compliance software. Our end-to-end solution simplifies every actionable stage of the import/export lifecycle while boosting security, profitability, and, most of all, compliance.
Our robust compliance software organizes all phases of compliance management into one platform, redefining trade operations.
Global EASE helps traders with:
- Screening of all potential stakeholders and partners
- Classifying all products accurately
- Understanding licensing needs and regulations applicable to specific transactions
- Simplifying logistics and shipping by integrating with Freight Forwarder & Broker systems
- Leveraging profit-enhancing opportunities like FTZs, FTAs, and duty drawbacks
- Applying for relevant authorizations, including licensing and permits
- Facilitating secure electronic data transfers
- Maintaining detailed and secure records using technology such as blockchain
- Preparing documents for in-house or regulatory audit requests at the touch of a button
- Creating and filing accurate customs documents
With EASE, traders can leave behind inefficient and error-prone manual processes in favor of compliance automation. EASE will transform how you make e-commerce transactions for the better, helping you stay on the cutting edge of a competitive and dynamic market.
From fledgling e-commerce companies to Fortune 500 giants, our software works at scale, adapting to the needs of our customers.
Reach out to find out more about how our powerful compliance software can help you master e-commerce trade compliance.
