Need a revised policy
– The Web
Cross-border sales of goods require certain formalities, including the declaration of goods to customs authorities, in accordance with the requirements of foreign exchange regulations. Other points to consider are the issuance of transport documents to the order of the banks concerned and the sending of export documents by bank to the banks of the importers to realize the export earnings. The space for realized export earnings is four months from the date of shipment.
The central bank has made some changes to facilitate business-to-consumer exports concluded on the e-commerce website against payments received in advance or cash on delivery/cash on delivery. The procedures require that the export be executed on a “cost and freight” basis, including the issuance of transport documents directly to importers overseas. From now on, the export declaration can be made via online declaration platforms, which disseminate information about the export to all concerned. This is a landmark work of the central bank.
Exporting through Internet-accessible e-commerce platforms facilitates retail transactions. Central bank regulations allow every $5,000 transaction against online payments captured by banks in Bangladesh. Cash on Delivery or Ship on Delivery is allowed for $500 per transaction. Regardless of the limit, e-tailers must make a declaration on the export form to customs authorities.
Business-to-consumer exporting is different from traditional bulk exporting. Online merchants call a courier company and hand over the goods to be shipped. The package contains the delivery address and a simple invoice. The courier organizes the customs formalities necessary for the goods to be transported by the airlines. The formalities are the same as those required for sending samples or gift items without any discount.
E-commerce requires door-to-door delivery of goods to customers after clearing customs. This mode of transportation is known as “free to door” shipping. In international trade, we speak of delivered duty paid. The price of goods within the customs cleared delivery time includes the value of the goods, the cost of transportation, duties and taxes and other incidental charges such as shipping and customs clearance.
What will be the problem if export form procedures are removed? It is a vital question. The problem is that the central bank monitors the achievement of export earnings based on the declaration in the export forms. In case of non-declaration, it seems that the control system is not working. But this is not entirely true provided an alternative system is devised and introduced.
Another point to note is that service exports do not require declaration. Services are provided invisibly. If no payment is received, no tracking tool works. Similarly, low value export through e-commerce may be feasible for which a proper monitoring system should be put in place.
Physical goods must undergo customs formalities. Based on the documentation, the customs authority issues the export invoices. The information in it is largely identical to the content of the export form. Cross-border e-commerce does not require banking formalities as export payments are received through alternative payment channels such as international cards, wallets, etc. at the conclusion of the orders. The system is as good as paying before shipping to buyers. Revenue includes all costs plus the price of the product for home delivery to buyers under the business-to-consumer program in the e-commerce export model.
Foreign exchange regulations require exporters to make a declaration to the customs authorities for which the export form is used. There is a paradox in the sense that customs authorities derive export information from sales contracts/letters of credit, invoices, packing lists and other relevant documents. One of the documents is the export form. Based on the information, the export invoice is issued by the customs authorities. The basic difference between the information contained in export forms and export invoices is that the former contain a statement from the exporters regarding the repatriation of export proceeds within the stipulated time from the date of shipment. Such statement is meaningless in case of payments received before shipment. There is therefore no risk in making payments, unlike exports executed under the traditional model. Payment guarantees in the form of bank guarantees, stand-by letters of credit or documentary credits can ensure that payments are made according to the traditional model.
Within a well-established control framework, the export invoice can be a control tool to identify appropriate repatriation of export earnings. In addition, payment received before shipment functions as security in the event of a defect. As a pilot program, a capped authorization can be initiated to promote retail exports under the business-to-consumer regime on web-based e-commerce platforms. Provisions in this regard can be set out appropriately so that exporters declare to banks that they will export goods at fair value and also provide banks with shipment details such as online orders, export invoice, courier receipts, etc. immediately from date of shipment. Courier companies should be specified by exporters with advice to banks so that customs authorities can be advised accordingly.
Incoming remittances received by bank, card or digital wallet against orders concluded on the website must be credited to exporters’ bank accounts upon completion of shipments. Among the receipts, retention facilities in foreign currency accounts should be authorized up to the admissible limit at the same rate applicable to traditional exporters.
Business-to-consumer sales indicate that the goods will be delivered to the doorstep of the buyers. This shipping method is subject to the term delivered duty paid. This incoterm is not commonly used, but it should be officially allowed for direct-to-buyer e-commerce exports. In this case, care should be taken to ensure that a sufficient amount payable to designated couriers for relevant costs at destinations as well as transportation and other charges is collected from consumers abroad.
The global business model is constantly evolving. As we all know, grocery store has been threatened with extinction due to the concept of chain stores. E-commerce is now replacing chain stores; creative destruction is found at every moment with the displacement of employment. In the changing situation of cross-border trade, we find different transitions. Other new concepts should emerge. In the future, the phasing out of the warehousing concept will put an end to bulk exports. Shipping companies are supposed to act as stores for delivery of goods upon receipt of online orders on behalf of sellers or marketplace platforms. The business-to-consumer model is the first step of the coming new situation, the next step is the business-to-business-to-consumer model. To be in export, we can only adapt to the situation. Even in the future, exporters will have to manufacture goods on board carriers with no specified destinations to deliver them to end buyers against orders from digital marketplaces.
There is no alternative to experiences. Traditional exporters must be accustomed to facing the upcoming challenges to which they must prepare. As a first step, in addition to mass exporting, own brands should be introduced through a business-to-consumer business model. Otherwise, it will not be easy to adapt to the coming change of situation in export trade. Appropriate policy supports should also be extended to exporters so that they can easily meet the challenges without suffering any negative impact. As policy support, exporting under the business-to-consumer model can be introduced with the simplification of traditional non-declaration transaction modes.
Tashzid Reza works in a trade finance company operating as a liaison office in Bangladesh.