Cross border e-commerce, has globally become one of the most popular means of commerce, as a result of the expansion and increase realized in its buyer population within recent years. Thanks to the advances in technology, cost reduction practices, regulations for protecting the parties and other facilities offered, the notion of cross border e-commerce is now much widely used.
It seems that cross border e-commerce would remain on the agenda for years to come, thanks to its capability of minimizing the losses on time and costs through direct purchases from the manufacturer and directly shipped goods to the consumer; having its marketing space spread all over the world and offering thousands of different products in each category. So what exactly is cross border e-commerce? How do you do it? Do structures similar to an cross border e-commerce platform exist both locally and globally, just like the structures existing for other platforms of commerce? What are the benefits offered by these structures to sellers that cross border e-commerce or desire to do so? You can have the answers to all these questions and even more by scrolling through our article that serves as an cross border e-commerce guide.
What is Cross Border E-Commerce?
Cross border e-commerce can be conceptually defined as cross-border e-commerce. It is no doubt that we live in an age of communication. With the support of digitalization, countries are turning into cities and the whole world into a single country. If we think of it as a perspective, all the world countries are becoming more and more intertwined and converge in many terms such as their cultures and consumer habits. A trending topic from the USA has rapidly spread across the globe thanks to the internet, creating demand by consumers from the other side of the world.
Consequently, intercountry borders are wiped away from human minds in time; creating one world, one country, and one culture. Regional cultures can nevertheless be ignored within this process. Cultural convergence would take longer years. Though intercultural divergence is observed in cross border e-commerce, the sense of “Think globally, act locally” is still valid in this field. The global volume of cross border e-commerce is rapidly increasing. The market recently worth two trillion USD is expected to experience an increase of approximately 50% within just two years. The major leverage effect in this expanding market will be caused by cross border e-commerce.
Cross border e-commerce, micro export in other words- is defined as the type of export accomplished within the scope of the Electronic Commerce Customs Declaration (ECCD). To cross border e-commerce within the scope of the Electronic Commerce Customs Declaration (ECCD), the related shipment should have a weight not exceeding 150 kilograms and a value not exceeding 7.500 Euros. Just like a website operating in Turkey that can ship products from Istanbul or any other city to Van or Ankara; shipping products to Hans from Germany or John from the U.S is made easy thanks to Electronic Commerce Customs Declaration (ECCD).
The traditional exportation method requires sellers to firstly search for, find and collaborate with distributors or companies they can work within related markets. Moreover, even if they manage to find these companies, they have to undergo operational procedures such as issuing a declaration form, and a certificate of weight during the exportation process. Moreover, they are required to pay additional expenses for each of the declaration form issued for customs clearance procedures. Which means heaps of workload both in operational and cost-wise, while you do not have to undergo such an effort for cross border e-commerce. To clarify this; all these procedures will be carried out by the related logistics company since you’d be working with ECCD licensed logistics companies, which in turn would make you accomplish your micro export rapidly and at great ease.
What Exactly Does Cross Border E-Commerce Mean?
This notion can shortly be defined as “cross-border e-commerce”. To explain this in detail, you might consider it as “Shipping the orders you get from overseas through online channels to your customers, in line with the rules of micro export”. At this point, the notion of “Think globally, act locally” becomes valid for cross border e-commerce as it is for all other types of commerce. It is necessary to know the details valid for local commerce, a basic understanding of exportation regulations, and an ability to think from a global perspective to healthily sustain the cross border e-commerce process. Having accomplished these, you can reach out to a broader market without any borders and expand your business by increasing your profit.
What is Micro Export?
Micro export is a type of export accomplished within the scope of the Electronic Commerce Customs Declaration (ECCD). According to this, the sales sum without VAT shall not exceed 7500 Euros for the sales realized within the scope of ECCD. Meaning that the upper limit for micro export defined by the Ministry of Economics is 7500 Euros. Moreover, the weight of the product sold shall not exceed 150 kgs. This type of sales practice is generally defined as “micro export”.
A normal customs declaration should be issued in case the sales amount exceeds 7500 Euros or the weight exceed 150 kgs. The normal declaration is charged while ECCD is free. A VAT-excluded invoice shall be issued for the products sold abroad through micro export practices. The shipment of products sold through micro export can only be achieved with an ECCD. The ECCD is completely free of charge and can be issued in a digital environment without the need for customs brokers. ECCD eliminated many documents required in foreign trade. Hence it is a kind of declaration that accelerates micro export processes.
What is Electronic Commerce Customs Declaration?
The Electronic Commerce Customs Declaration (ECCD) is a document issued for the exporting or importing companies only by authorized logistics companies or operators, on the digital environment. The sales amount for the product or commodity within the scope of ECCD shall not exceed 7500 Euros, and its weight shall be under 150 kgs. Exportation of the products having these qualifications is termed as “Accelerated exportation”, “micro export”, or “ECCD”.
ECCD is electronically approved by the Customs Office and is submitted to the Tax Office Automation Project’s (VEDOP) system. VAT refunds can be issued with the print-outs of ECCD. ECCD can not be issued by customs brokers. The logistics companies carry out legal procedures as soon as they receive the products and submit the sender companies their ECCD documents by mail.
Authorized logistics companies are responsible for the tracking and finalization of all activities related to all kinds of customs procedures. No costs such as customs brokerage fees, warehouse charges, and exporters’ association fees are applied for these procedures. Micro export procedures can be minimized through collaborations with companies authorized for issuing ECCD; such as PTS, DHL, UPS, and TNT.
The following documents are requested by logistics companies for the ECCD:
- Indirect representation authorization certificate (with the certificate of incumbency attached)
- Exportation information form
- Copies of the invoices (Turkish and English)
- Packing list
What Are The Advantages Of Cross Border E-Commerce?
Cross border e-commerce is the leading trend among the latest years’ online shopping trends. Becoming even more popular thanks to governmental incentives, cross border e-commerce can offer profit and value to the brands within a short period. Above all, earning in foreign currency has certain advantages for both the companies and the country.
So, what are the advantages of cross border e-commerce?
- Investment costs are greatly lower than that of traditional export.
- Banker’s indemnity is not required; agreements can be made with online payment companies for receiving payments.
- It is a kind of commerce where risks are minimized. For instance, millions’ worth of loss could be experienced when a problem occurs with products shipped in containers. These kinds of risks are at a minimum for e-commerce.
- It’s much easier to reach the target market compared to traditional commerce. Digital marketing techniques offer in-depth market research and allow for reaching relevant markets.
- No procedures such as certificates or certificates of compliance are applied for products within the scope of micro export.
- It is minimally affected by economic fluctuations, and foreign currency input can transform these fluctuations into profit.
- Exchange rates can duplicate the profits. Approximately six times of profit can be made when a 2 TL product is sold for 2 $.
- Governmental aids and incentives are offered for e-exporting companies. For instance, VAT is not paid thanks to the tax refund. This amount is added to the profit, whatever the VAT rate might be.
- Any country in the world can be the target market. The expansion policy of the company is of priority when selecting a target market, and other factors are of secondary importance.
What Is The Contribution Of Cross Border E-Commerce To The Turkish Economy?
Turkey’s cross border e-commerce target for 2023 is 350 billion TL. cross border e-commerce’s portion of this target is approximately 70 billion TL. Having the capacity to lead e-commerce in Turkey, cross border e-commerce would also be the trigger for digital transformation.
Cross border e-commerce is an economic benefit channel itself, as it supplies foreign currency to country economics through cross-border commerce. Companies can break their shells and expand to foreign markets from the unproductive internal market. This way, they can increase their profitability while contributing greatly to the economics of the country. Being the first step for companies in becoming global player, cross border e-commerce is one of the most practical ways of exporting local products. Having the opportunity to ship all over the world means an increase in foreign currency input for the country. By expanding overseas markets, the companies’ activities are expanded while contributing to the ecosystem and country economics. Having a significant potential for Turkey to attain its e-commerce and export targets, cross border e-commerce will become the most important exportation tool in years to come.
What Are The Differences Between Traditional Export And Cross Border E-Commerce?
Classical or traditional export, in other words, consists of many strict rules. Since classical export is related to many details from public health to domestic safety; from commercial law to financial procedures, these rules are required to be present and to be applied at all times. And since this fact leads to adverse outcomes such as increases in costs and elongated process timings, the differences between traditional export and cross border e-commerce generally are in favor of cross border e-commerce.
✔ Many details from the type of product sold to the sales amount; from the shipping option to the country shipped shall be considered carefully in classical meaning business to business export. Otherwise, cases such as the delayed or failed shipment of products can happen as a result of missing details or failures in your shipment. On the other hand, additional effort or time is generally not required in cross border e-commerce since there’s no obligation of business to business shipment and the product can be shipped directly from the company to the customer; and because the shipment and delivery processes consist of simpler and easier steps.
✔ Since shipment costs and time is less in products sent directly from the seller to the buyer, you can benefit from customs tax exemptions of the country of delivery for these types of products. Whereas, different practices of customs tax exemptions can not be benefited in classical export since the shipment is not realized from the seller to the buyer but from business to business at all times.
✔ Thanks to agreements made between Turkey and other countries, individual customers might have the right to benefit from a VAT exemption. The rule to note for this exemption is the price of the product(s) purchased. For instance, no VAT is applied for purchases not exceeding 1000 EUR for Russia, 800 USD for USD, 500 EUR for Azerbaijan, and 22 EUR for EU countries. Thereby, trading across these countries become even more advantageous in every way.
✔ Many complicated and effort requiring details such as the shipment method, permits and documents to be acquired for compliance to shipment, the shipment process, smooth delivery of products and alike are present in classical trade. Whereas two basic shipment options exist for cross border e-commerce: Delivered Duty Paid (DDP) and Delivered Duty Unpaid (DDU). Delivered Duty Paid (DDP) signifies the shipment with customs duties paid, while Delivered Duty Unpaid (DDU) signifies these costs are charged from the other part, meaning the customer.
Why Should You Cross Border E-Commerce?
Today, cross border e-commerce is a popular type of trading. E-export, also defined as “Micro export”, is realized under the Electronic Commerce Customs Declaration (ECCD). Cross border e-commerce is a type of sales where you directly sell to the retail customer. A VAT-exempted invoice can thus be issued in the name of the retail customer. Moreover, it is possible to benefit from VAT refund offered for exporting activities. Credits and incentives offered by banks and governments can also be benefited from as well.
Cross border e-commerce is a significantly profitable type of commerce as long as proper products are marketed in proper markets. Thorough research for target audience and markets shall thus be conducted. Allowing sales to retail customers in any country, cross border e-commerce financially contributes to individuals, companies and country economics.
The following reasons shall suffice for getting into cross border e-commerce:
- By overcoming the domestic market’s fluctuations, cross border e-commerce allows you to expand overseas.
- It enhances profitability since the order sums are higher compared to those of the domestic market.
- It lays the foundation for larger volumes of export.
- It offers an advantageous place in the competitive environment of the domestic market.
- It builds a good image and a positive perception of the companies.
- Costs can be reduced through the utilization of government incentives. All incentives and exemptions offered for exportation activities can be utilized.
- Strict rules of classical trade can be eliminated.
- Cross border e-commerce generates new markets, new products, and new strategies.
- VAT-excluded invoices can be issued and a VAT refund can be received.
- B2C custom tax exemptions are valid.
- Bilateral trade and customs agreements between countries can be benefited.
- Processes such as business processes and tracking are realized by the authorized logistics companies using an automated system.
- The rules are more transparent and easy to apply.
- Peer-to-peer service facilities are simple and economical.
- Trademark registration is not required.
- Practices such as translation of documents and apostille are not required.
- Procedures such as seller and buyer company records, certificates of hygiene, and laboratory analyses are not required.
How To Start Cross Border E-Commerce?
Cross border e-commerce means the sale of products via the internet, to customers abroad. It might also be defined as “Exporting from the internet”. Processes such as finding customers, displaying products, receiving orders and delivery of orders are managed over the internet. So, how to start cross border e-commerce?
Cross border e-commerce can be realized in two ways. You can choose the one most convenient for your business. You can start by choosing the type of cross border e-commerce most suitable for your business. The first method is selling at common cross border e-commerce sites. It is an easier, faster, and cost-free cross border e-commerce method for starters.
Counterparts of store-based e-commerce sites (such as N11, and Gittigidiyor) also exist abroad. You can reach millions of people all around the world over these platforms. The global giants of cross border e-commerce are eBay, Amazon, and Etsy.
eBay and Amazon are the world’s two largest online retailers. Thousands of stores sell to millions of people over these websites. Etsy is the world’s third-biggest shopping giant. Hand-made products, antique and collection items that are not mass-produced or manufactured are sold through cross border e-commerce at this site. You can start selling by creating an account in cross border e-commerce sites. The expenses you pay for all the procedures would be incomparably less, compared to those for classical exporting procedures.
You can also create your website to start cross border e-commerce. You can display your products, define your sales and customer strategies at the website you establish under corporate identity. You might need certain tools such as search engine optimization (SEO) for attracting customers to visit your website. And you should consult experts for making this happen. Moreover, you should spare an advertising budget for your ads to be displayed on digital platforms.
Apart from all these, note that the most risk-free and cost-efficient method of cross border e-commerce for starters is using cross border e-commerce sites. We recommend that you get support from companies such as Worldef that offer cross border e-commerce training and consultancy, in case you opt for using cross border e-commerce sites.
Can I Benefit From Cross Border E-Commerce Incentives, Exemptions And Government Incentives?
All the cross border e-commerce companies can benefit from cross border e-commerce incentives, exemptions and government incentives. Cross border e-commerce is micro export. One of the major advantages of cross border e-commerce, which is an efficient type of commerce, is the incentives and exemptions offered by the governments. These incentives and exemptions are greater compared to those for other types of export.
Cross border e-commerce companies can benefit from customs duties and overseas VAT exemptions. These exemptions may vary by country. The shipment amounts for customs duty exemption vary from country to country. Cross border e-commerce companies can issue VAT-excluded invoices in the name of retail customers. Moreover, they can benefit from the VAT refund advantage. They also can benefit from incentives aimed at exporters such as private banks’ exporters’ credits, and governments’ special incentive credits.
What Are The Customs Duty Exemptions For B2C Orders?
Business-to-customer (B2C) cross border e-commerce can be accomplished by using certain incentives. The most significant one of these is the customs duty exemption. Many countries apply customs duty exemption for B2C orders. The only requirement for customs duty exemption is that an Electronic Commerce Customs Declaration (ECCD) shall be created.
B2C customs duty exemptions of some countries can be listed as follows:
- EU countries do not charge customs duty and VAT for shipments of ready-made clothing products under 22 Euros.
- All product types with order amount not exceeding 1000 Euros are exempted from customs duty and overseas VAT when shipped to Russia. Russia offers customs duty exemptions mainly for products such as leather and fur.
- Ukraine applies customs duty and VAT exemption for shipments below 150 Euros.
- Cross border e-commerce shipments made to the US are exempt from customs duty and overseas VAT, on condition that the shipment amount does not exceed 800 USD.
- Azerbaijan applies customs duty and VAT exemption for monthly shipments below 500 Euros.
- Orders below 270 USD are exempt from customs duty and VAT in Gulf countries.
What is Customs Tariff Statistics Position?
Customs Tariff Statistics Position (GTIP) or “HS Code” is the international numbering system applied by the World Customs Organisation for the categorization of the products subject to trade. In other words, it is the customs tariff. It is a system aimed at expressing products subject to international trade by numbers.
Products present in the Customs tariff schedule are defined by 12 digits. The first six digits of this number is the international standard position. Meaning that the first six digits is the GTIP number, and represents the same product in all the countries. Numbers following the first six digits vary by their utilization in different countries.
GTIP codes are used over 200 countries across the globe. Covering over five thousand products worldwide, the GTIP code is a practical coding system that allows statistical data collection in many fields from quota controls to trading policies. GTIP codes are used in many areas such as logistics and customs documents of the product to be exported, tax regulation documents, incentive and exemption documents, and market research surveys.
Products are categorized by a 12 digit code in Turkey. Within the scope of customs union agreement with the EU, Turkey uses eight-digit based codes as are used in EU countries.
The coding system in Turkey can be explained as follows:
- The first four digits signify the product’s position number,
- The first six digits are the Harmonized System Nomenclature Code used by the World Customs Organization member countries,
- 7th and 8th digits are the European Union Combined Nomenclature Code,
- 9th and 10th digits are the position codes relevant to tax applications,
- 11th and 12th digits are the Customs Tariff Statistics (GTIP) codes.
What Is The Cross Border E-Commerce Strategy And Action Plan?
The cross border e-commerce Strategy and Action Plan is a strategical plan prepared by the Ministry of Economics to increase Turkey’s share in international trade from 2018 to 2020. The plan consists of seven targets and 23 actions.
Cross border e-commerce Strategy and Action Plan aim at increasing Turkey’s share in international trade and making the country a regional e-commerce center by allowing cross border e-commerce to be easier and more accessible for Turkish exporters. The targets of the three-year-plan are as follows:
- Creating an integral regulation that meets all the legal, technical and application framework demands related with cross border e-commerce,
- Making fast cargo shipment more efficient through the formulas developed in the logistics field,
- Reducing costs by cheaper shipment of bulk orders,
- Facilitation of customs procedures,
- Enhancing overseas recognition of Turkish based payment service providers,
- Establishing support mechanisms convenient for exporters,
- Raising awareness in SMEs and micro-entrepreneurs by introducing them to cross border e-commerce,
- Generating international collaboration opportunities for cross border e-commerce.
What Are The Platforms For Cross Border E-Commerce?
You can use certain platforms for starting e-exportation. The most practical way that allows you to sell your unique products overseas is the cross border e-commerce platforms. These platforms allow you to sell overseas retail customers. Diverging from classical export in this sense, cross border e-commerce is the most practical way of selling from business to consumer. Advantages created along with the digital world clear cross border e-commerce’s way as well.
Commonly used platforms for selling at global marketplaces can be listed as follows:
How To Handle Cross Border E-Commerce Cargo Processes?
One of the major concerns for cross border e-commerce is the cargo process. The cost of the shipment shall not exceed 7500 Euros, and its weight shall not exceed 150 kgs for cross border e-commerce cargo processes. Shipments holding these qualifications are exempt from customs brokerage services and shipped by cross border e-commerce cargo companies along with Electronic Commerce Customs Declaration (ECCD).
Cross border e-commerce cargo processes are handled by cross border e-commerce cargo companies. Articles of General Customs Communiqué apply for the cargo shipment processes. Cross border e-commerce cargo requirements apply for the cross border e-commerce processes that do not exceed 150kgs and 7500 Euros, that are conclusive and realized for sales purposes, and that do not require any other regime.
Cross border e-commerce cargo companies operating in Turkey can be listed as follows:
- MNG Cargo
- Yurtiçi Cargo,
- Express Cargo.
Some points to consider for handling cross border e-commerce cargo processes are as follows:
- The product shall cost less than 7500 Euros, and weigh less than 150 kgs, to ship products overseas free of duty. Processes must be handled with a detailed declaration through a Customs Brokerage company, in case these limits are exceeded.
- Documents such as indirect representation authorization certificate, exportation information form (work order), internal revenue office approved invoice (Turkish and English) are required for cross border e-commerce cargo shipments.
- The portion of shipments VAT taxes that are not subject to sales can be refunded.
- Electronic Commerce Customs Declaration (ECCD) is required for cross border e-commerce cargo procedures. The Electronic Commerce Customs Declaration (ECCD) is a kind of declaration issued for the exporting or importing companies by express carriers, on the digital environment
- ECCD declarations can be issued by licensed carrier companies.
- Conclusive and sales aimed export products can be shipped by licensed cargo companies for cross border e-commerce. Shipments requiring a different regime such as those for fairs are outside the scope of cross border e-commerce.
Which Sectors Can Succeed At Cross Border E-Commerce?
Cross border e-commerce has many advantages, but these might turn into disadvantages if you do not have the right products for the marketplaces. Therefore, research have to be conducted in relevant industries for cross border e-commerce. Relevant sectors for cross border e-commerce are directly related to the country to which cross border e-commerce will be realized. For instance, it would be a smart move to sell fur and leather products to Russia. Comfortable ready-to-wear products might be a good choice of cross border e-commerce to Gulf countries. Hence, relevant sectors for cross border e-commerce might differ according to the environmental conditions of the geography where the target audience lives, country’s demographical features, and even its political status.
The high-added-value shall be selected to succeed at cross border e-commerce. The most appropriate sectors for cross border e-commerce are as follows:
- Regional Products,
- Home Textiles,
- Automotive Spare Parts,
- Automobile accessories,
- Ready To Wear Products,
- Mother and Baby products.
Things To Know For Practicing Cross Border E-Commerce
First things first, you can display your products by yourself or with the help of your team and realize their sales thanks to online sales channels in this popular commerce method, no matter whether you are a producer or an intermediary. A major profit can be made in time and costs since there is no requirement of a physical sales point between the producer and the consumer in cross border e-commerce processes. You may as well benefit from the advantages of cross border e-commerce if you already are a seller with a sale point or points, where you can display and sell your products, not on a local but a global basis.
You shall first have comprehensive knowledge on micro export terms since cross border e-commerce is taken in micro export terms by governments, and the ECCD (Electronic Commerce Customs Declaration).
Following rules must be adhered to during the current micro export processes:
- You shall not exceed a weight of 300 kgs for the products to be shipped overseas.
- You shall keep the cost of your shipment below 15000 EUR.
- You shall issue a VAT-excluded invoice for your products sold overseas.
- You do not have to seek for customs brokerage support as long as you ship in line with these guidelines.
- Moreover, you can receive a tax refund for the products sold in line with these guidelines.
While the basic things to know and the guidelines to be observed for everyone desiring to practice cross border e-commerce are as explained above; the products you wish to sell, your choice of online sales channels, your target audience and regions, your profit rate and expectations are only up to you.
Cross border e-commerce practices generally commencing as B2C meaning directly from the business to customer in a rather small scale may turn into B2B/B2C meaning from the business to intermediary, and then from the intermediary to customer depending on the progress rate and process of the practice. It might thus be necessary to create an intermediary organization to set up a business in the countries shipped and to reach customers, as the volume of cross border e-commerce expands. All these steps are realized according to your expectations from cross border e-commerce.
Useful Hints For Those Practicing Or Aiming To Practice Cross Border E-Commerce
If you are new to cross border e-commerce or would like to focus on the subject, you might ease your job by taking a look at the following hints:
✔ You can benefit from the government’s temporary or long term exemptions, incentives or support for cross border e-commerce, just as you would for classical exportation. This means that practicing cross border e-commerce will not impose any restrictions on you compared to classical export, on the contrary, it allows you to benefit from numerous advantages.
✔ Each convenience you offer your customers (special prices for countries that do not make customers pay VAT, options for a single payment of everything including the shipping cost, and alike) make your brand name more and more recognized, making the rate of your preference increase. Therefore, you might opt for DDP -delivery duty paid- to increase client satisfaction as you sell through cross border e-commerce.
✔ You shall establish a website relevant to the concept of the products you want to sell, and that has an e-commerce infrastructure. Then you shall make use of the tools such as SEO, Google Adwords, and Facebook Ads to enhance your website’s recognition. Having a practical, uncomplicated website structure for the potential customers visiting your site, and rapid steps toward finalizing shopping also play an important role in enhancing sales.
✔ Last, but not the least; you can keep yourself up to date and knowledgable in terms of the sector by following platforms that include useful information on cross border e-commerce made up of professionals in the area, and that offer constantly changing trends, activities and training, such as Worldef.
Should You Get Cross Border E-Commerce Training?
The answer to the question in the title is definitely “Yes”. Why? Because inexperienced companies in cross border e-commerce field might get disappointed. Which cross border e-commerce market to enter? How do you identify the target market for the product you want to sell? What are the cross border e-commerce incentives and exemptions for the countries you aim to practice cross border e-commerce? Dozens of questions like these shall be answered before starting practicing cross border e-commerce and for this reason, an cross border e-commerce training shall be received.
Advantages of cross border e-commerce training are as follows:
- You can have information on cross border e-commerce practices in different areas.
- It provides vision to SMEs and everyone desiring to cross border e-commerce.
- It raises awareness of the opportunities offered by cross border e-commerce.
- It significantly contributes to practices of cross border e-commerce frameworks, development of cross border e-commerce visions, the establishment of a global network with overseas marketplaces and global sales.
- It can be modeled according to the need of entrepreneurs that are already in or in the desire of getting into cross border e-commerce.
- It provides an opportunity to learn about many topics such as government incentives, payment systems, logistics infrastructure, customs processes and brand registry.