6 details to consider when taking your direct selling business international
You’ve done it. You’ve established your direct selling venture in the U.S. Business is booming, so you're thinking about going international. But where do you start? What major factors do you need to consider?
We’ve got your top six here to get you started.
- Identify your markets and how many
Think about how far and wide you want to go. How simple or complex. Do you want to avoid language hurdles and stay within English-speaking countries or go for it all with multinational sites?
Do you want to sell to a specific region? A geographical union like Asia-Pacific, the Middle East, or the European Union? There are 27 countries in the EU, so that could be quite a significant endeavor.
Consider what hurdles you may run into in locations where you’re looking to expand.
- Know your restrictions
Before you make a final decision about your markets, you’ll want to investigate product restrictions in those markets. The usual suspects like firearms or explosives are typically rather transparent, but the less obvious merchandise can be a surprise. For instance, you can’t ship herbal tea or laser pointers into Saudi Arabia. You also can’t get perfume or stationery into Nigeria nor chewing gum into Singapore — unless its medicated. Canada says no to “dangerous goods,” — a very vague designation, which by many accounts seems to include baby walkers. And Malaysia doesn’t want citizens drinking imported coffee or writing in foreign-made diaries.
Some locales won’t go as far as outright banning products but will instead inflict restrictions, such as high duties, limited quantities, or import licenses to curb buyer enthusiasm.
As a seller, you want to research diligently to ensure your products aren’t banned or otherwise restricted.
- Discover punitive or preferential duty treaties
Do the countries you want to sell to hold treaties with the country you’re shipping from that may hinder your sales? Consumers might choose to purchase similar merchandise with a lower duty (because of a treaty).
Being aware of trade treaties with other countries can provide valuable price competition knowledge — you may be at an advantage in some countries, too. For example, the United States-Mexico-Canada Agreement grants preferential duty rates for such items as dairy products, auto parts, and clothing. So, you may benefit from importing items on that agreement list into those countries.
A lower price point for goods can come under scrutiny, if sold in excessive volumes creating unfair advantage to the home country. Additional duties (anti-dumping) or quotas can be imposed by the importing country to create a fair competitive environment. The previous administration’s China tariff is an example. A vast list of merchandise imported from China held an extra 25% duty.
Knowledge of your markets is vital to your business growth and success.
- Determine your terms of sale
When selling abroad, there are 11 internationally recognized incoterm (or terms of sales) — the two most common are delivery at place (DAP) and delivery duty paid (DDP).
Choosing DAP subjects the buyer to pay the import duties and taxes — which means the product will be held at customs until the customer settles the debt. If you don’t clearly declare and define this shipping method, buyers may become confused, frustrated, and reject shipments. Returned goods can take a costly chunk out of your revenue and tarnish your reputation and customer retention. Imagine purchasing the perfect gift for your mother’s birthday, only to discover you owe an additional $200 in taxes and duties you don’t have.
When you opt for DDP, as the seller, you bear all responsibility for risks and paying the import duties and taxes of the sale. The carrier will remit the duties and taxes on behalf of the seller then invoice the seller for the total. This method allows the product to pass through customs and be delivered directly to the recipient. DDP arguably holds less hidden risks for the buyer, though it can financially burden the seller if not handled properly. When managed well, DDP does help simplify the complexities of international shipping.
For many major online retailers, DDP is the preferred shipping method.
- Decide if you’ll have a physical presence
Once you’ve determined your geographic target, it’s time to decide if you’ll operate remotely or establish a physical presence.
If you maintain an office or other physical establishment, you’re considered the importer of record and beholden to local authorities. An importer of record is who the governments of shipping and receiving countries hold responsible for the product, the sale, and all taxes. Customs officials expect the importer of record to understand the responsibilities for product and tax compliance for cross-border transactions.
Part of the authorities’ agenda is to keep track of contraband and illegal products, and other illicit activities, the other is tax and duty compliance. The related authorities want to know who’ll pay the taxes associated with the transaction, whether import duties or sales taxes.
If you wish to sell remotely only, you’ll need to appoint an importer of record. Often carriers — UPS, FedEx, DHL, etc. — serve as importers of record up to a maximum product value.
- Choose your carrier
This is a critical decision. You’ll want a carrier on which you can rely. Should there be an issue with a product entering the destination country, the local government would contact your carrier to handle matters.
Taking your direct selling business international be full of excitement and headaches. But you can relieve some of your tension if you take your process one step at a time, carefully research, and consider all your options and obstacles.
If you’d like more information or a helping hand for international expansion, visit Avalara.
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