Dossier: E-Commerce

Now is the time for implementation

By Kunio Mikuriya, WCO Secretary General

In many countries, statistics show a strong uptake of online sales and a big increase in the market share of online as opposed to offline retail since the start of the pandemic. In COVID-19 and e-commerce: a global review, the United Nations Conference on Trade and Development reported that Latin America’s online marketplace Mercado Libre, for example, sold twice as many items per day in the second quarter of 2020 as during the same period in the previous year; African e-commerce platform Jumia reported a 50% jump in transactions during the first six months of 2020.

The three members of the Global Express Association (DHL, FedEx and UPS) have also seen a massive increase in the volumes of non-document shipments they carry.  During the first wave of the pandemic – February to June 2020 – their volumes grew by 50%. Part of this increase was medical equipment (PPEs, masks, etc.), but a substantial proportion was made up of other types of items.

Consumers went online – many millions of them for the first time – because they could not go out to the shop round the corner. Some observers believe that many will return to the shops when they re-open, but many will continue to shop online. In other words, the volumes of shipments of goods purchased online will stay strong during the recovery from the pandemic.

It is more difficult to find data on international online sales, but here as well, volumes are reported to be increasing. When the COVID-19 outbreak became global early in 2020, initial uncertainty and transport disruption caused a dip in international online sales, but according to cross-border e-commerce solution provider eShopWorld, they rebounded in April 2020 and then rose to unprecedented levels throughout the course of 2020.

It has in fact been pointed out that facilitating cross-border e-commerce could help with the economic recovery, provided there is due emphasis on the need to ensure that the smallest traders can avail themselves of the export opportunities this brings.

Many countries have established thresholds below which no duties and taxes are levied and only minimal information is required to be provided when a consignment enters a country. While the value of this threshold varies a lot, in most countries the exponential increase in the sale of physical products online translates into an increasing number of “low-value” shipments crossing a border. Controlling this particular flow of goods to prevent the movement of prohibited and restricted goods, and identify consignments which have been split and/or undervalued to evade duties and taxes, presents a number of challenges.

The pressing issue is how to manage this time-sensitive flow of goods without placing a strain on control operations and on the capacity of logistics service providers, and without creating complex procedures and a heavy workload for small businesses and individuals who have limited capacity to meet complex trade regulations.

WCO standards and guidance material

To address this issue, WCO Members have been working through a multi-stakeholder Working Group on E-Commerce (WGEC)[1] on the development of international norms and guidance material, which have been brought together in an E-Commerce Package including not only a Framework of Standards on cross-border e-commerce (E-Commerce FoS), but also many tools to support its implementation.

The Framework provides 15 baseline global standards with a focus on the exchange of advance electronic data (AED) for effective risk management. It also encourages the use of the Authorized Economic Operator (AEO) concept, non-intrusive inspection (NII) equipment, data analytics, and other cutting-edge technologies to support safe, secure and sustainable cross-border e-commerce.

Now is the time for implementation, and a broad capacity building action plan which will guide the WCO Secretariat’s activities in the coming months has recently been added to the Package, along with key performance indicators (KPIs) which will make it possible to monitor the implementation of the WCO standards and identify capacity building needs.

In January 2021, the Secretariat started rolling out regional workshops to ensure that all WCO Members had a good knowledge of the Package; these workshops included representatives of the Universal Postal Union (UPU), the Organisation for Economic Co-operation and Development (OECD), the Global Express Association (GEA) and e-commerce stakeholders.

As a next step, in 2022 national workshops will be planned for administrations that have notified their intention to implement the E-Commerce FoS, completed an assessment using the WCO KPIs and made an official request to the Secretariat. The Secretariat has already accredited 11 Technical and Operational Advisers on E-Commerce so it can respond positively to such requests for assistance.

Main challenges and topics discussed

Areas posing specific challenges were identified during the regional workshops. They include the collection of electronic advance information on e-commerce shipments, the improvement of compliance and data quality, the simplification of duty and tax payment procedures which are often too complex, and the strengthening of risk analysis capacities. The topics discussed included expanding the concept of Authorized Economic Operator (AEO) to include e-commerce stakeholders, the use of advanced technologies, and cooperation with stakeholders such as marketplaces, fulfilment centers and free zones/warehouses.

Governments and business need to meet this challenge together

In the same spirit as the regional workshops, on 28 and 29 June 2021 the Secretariat held its Second Global Conference on Cross-Border E-Commerce, thanks to the financial support of the Customs Cooperation Fund of Japan. Some speakers highlighted the tremendous degree of dynamism and also the variety observed in countries nowadays in the area of cross-border e-commerce approaches, legislation and capacity; for example, the ability to analyse data for risk assessment purposes varies a lot between national agencies and countries. Moreover, while the underlying technology enabling data exchange may be similar in terms of its fundamental logic, the requirements differ from one administration to another.

One of the objectives of the workshops and the Conferences has been to enable Customs to share processes and procedures, as well as to better understand the e-commerce “ecosystem” and its business models. Other forums also exist at the national level, with more and more Customs administrations creating working groups with e-commerce stakeholders as they review their legal and operational frameworks. At a higher level, companies have started building their own cooperation frameworks with some governments in order to explore new policies and rules in support of trade.

Dossier contents

For the “Dossier” in this Edition, we have invited several administrations to share information on the initiatives they are taking to enhance their capacity to control the compliance of “low value” shipments.

We start with an article by Argentina Customs, explaining how the Administration is reviewing its legal, policy and operational framework to ensure it is aligned with the WCO E-Commerce FoS and other WCO guidance material. The article does not describe the procedures in place to process the flows of goods generated by online sales in Argentina, but interested readers can consult the WCO Compendium of Case Studies on E-Commerce to which Argentina Customs contributed. Instead, the article focuses on the various steps of the review process.

This is followed by an article by United States Customs and Border Protection about two test programmes it recently conducted to assess the possibility of collecting certain advance data related to shipments potentially eligible for release under its de minimis entry process, and to implement a new entry process for such shipments.

Next, the use of three types of technology to enhance targeting capacities is described in an article by the Korea Customs Service. These technologies are blockchain, artificial intelligence and big data. The Administration also shares some interesting lessons, highlighting the fact that successful technology-focused projects aim to find solutions to actual issues faced by operational officers, and that teamwork between ICT and Customs experts is critical.

The last article introduces Peru Customs’ new clearance process for express shipments, as well as the web platform and mobile application it has developed to enable importers to track the status of their shipments and pay duties and taxes at authorized banking institutions. Not only has the new process enabled the Administration to improve its risk management procedures, it has also significantly reduced the time required for the release of goods.

Even if every country’s situation is unique, I believe that it is still important to ensure experiences are shared and initiatives explained. More and more Customs administrations are looking at how to review or enhance their legal and operational frameworks in line with WCO standards and guidance tools. I warmly encourage them to contact us should they wish to communicate on their eff

[1] The Working Group comprised representatives from governments, the private sector, international organizations, E-Commerce stakeholders, and academia.