Perry Lavergne

Perry Lavergne

Pro Partner, Canada for Last Mile Experts, providing businesses and postal operators around the world with the deep dive analytical insights.

Cross-border e-commerce Northbound / Southbound ; where do you begin? Learning the jargon and rules of cross-border e-commerce selling is probably a good place to begin understanding terms like “De minimis.”

In the simplest terms de minimis is the value of merchandise you can ship to another country free of Duty and Tax.

De minimis definition is a Latin term that simply means something that is so small or trivial. In the ecommerce world this relates to the destination country-specific threshold that tells you when duties and taxes are applied. This levy must be paid by either the shipper or the customer importing the goods. Not all goods have levied duties and taxes depending on free trade agreements, merchandise maybe tax-free.

De minimis-Northbound  Goods with a value for duty of CAD $20.00 or less will have any applicable customs duties and taxes waived when imported from any country.  Under the Canada United States Mexico Agreement (CUSMA) goods with a value for duty of CAD $40.00 or less will have any applicable customs duties and taxes waived when imported from the United States or Mexico only; goods with a value for duty of CAD $40.01 or greater, up to and including CAD $150.00, will be free of customs duties (however, taxes will remain applicable) when imported from the United States or Mexico only.

De minimis-Southbound  De minimis provides admission of articles free of duty and of any tax imposed on or by reason of importation, but the total retail value in the country of shipment of articles imported by one person on one day and exempted from the payment of duty shall not exceed US $800.

Brokerage Fees The brokerage fees generally apply to regular ground shipments and cover the costs of processing the paperwork and paying the taxes and duties to the Canada Border Services Agency (CBSA) or U.S. Customs and Border Protection (CBP). The fees are calculated on the value of the product being shipped.

Carrier Fees Generally, this will be charged based on the weight, size, distance, speed and the number of items. Remember to factor in the exchange rates on shipping fees.

Landed Cost is the calculation of duties and taxes along with additional fees from customs, brokers, and shipping carriers.

Non-Resident Importer (NRI) For U.S. businesses that sell directly to Canadian consumers, the U.S. business takes responsibility for customs clearance and other import-related requirements. This eliminates unexpected additional fees once the goods pass into Canada. The NRI Program is an initiative of CBSA that allows United States exporters to sell products to Canadian customers directly on a delivered-price basis, without the need for a physical presence in Canada.

Duties & Taxes – Northbound Any item mailed to Canada may be subject to the Goods and Services Tax (GST) and/or duty. Unless specifically exempted, you must pay the 5% GST on items you import into Canada plus applicable provincial taxes. The CBSA calculates any duties owing based on the value of the goods in Canadian funds.  The Government of Canada has entered into agreements with certain provinces to collect the HST. If you live in a participating province, you will have to pay the HST instead of the GST.
Duties & Taxes – Southhbound When the total amount of merchandise shipped to the US in one day does not exceed US$ 800, it will be free of Duties and Taxes.
HS Code The World Customs Organization’s (WCO) oversees the Harmonized Commodity Description and Coding System (HS). It allows participating countries to classify traded goods on a common basis for customs purposes. The duty rates vary according to the type of goods you are importing and the country from which they come from or were made in. The HS code is a six digit code that identifies the merchandise. It has 500 commodity groups, 99 chapters and 21 sections.
Incoterms® are widely-used terms of sale. There are a set of 11 internationally recognized rules which define the responsibilities of sellers and buyers. Incoterms specifies who is responsible for paying for and managing the shipment, insurance, documentation, customs clearance, and other logistical activities. Of primary importance is that each Incoterms rule clarifies the tasks, costs and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will help improve smoother transaction by clearly defining who is responsible for what at each step of the transaction.
Preparing paperwork for cross-border e-commerce will vary depending on the type of goods being shipped, their value and destination country. Listed below are steps to be considered before you prepare your customs paperwork and ship your merchandise.
Cross-Border Purchases Interestingly, the International Postal Corporation (IPC) Cross-Border E-Commerce shopper survey 2018, shows cross-border Canadian purchases U.S. to CA at a much higher rate (53%), than American shoppers CA to U.S. at (6%). Where the U.S. ranked in the top 3 most recent cross-border purchases, we find Canada, South Korea and Mexico leading the pack.
E-Commerce Payment Preferences, merchants are leaving potential cross-border sales on the table by not being flexible on payment options. Cross-border merchants need to be mindful that every country has unique local payment methods. Merchants need to look at a range of alternative local payment methods. Research by Hubspot found that 59% of shoppers will abandon an online transaction if their preferred way of paying is not available. Alternative payment methods can include things like Bank e-transfers, Cash on Delivery (COD), E-wallet, mobile wallet, and much more. Addressing local payment methods will be sure to increase conversion rates.
Cross-Border Delivery Issues, in the IPC Cross-Border E-Commerce shopper survey 2018, 25 % of respondents indicated that the delivery times were too long. 10% indicated that the delivery time was inconvenient and 9% that the delivery cost were to high.