If the digital revolution gave a boost to global business by eliminating physical borders to retail shopping, it may have consequently created a headache when it comes to understanding supply chain logistics and customs regulations. While global merchants may be optimistic about the growth of eCommerce opportunities, their supply chains now include a reverse logistics process to manage returns from the consumer back to the merchant which undoubtedly leads to more costs incurred by merchants as products pass through multiple customs checkpoints.

Global eCommerce has been growing rapidly, especially since the Covid-19 pandemic, as more consumers have grown accustomed to shopping through their smartphones. eCommerce already accounts for approximately 20% of retail sales and is expected to surpass 21% in 2024 (source: Shopify).

China makes up over 50% of the global eCommerce market, followed by the United States and the United Kingdom.

Processing orders online and then activating the supply chain can be more complex when exporting to other countries. As global eCommerce grows, the demand for professionals who can understand customs regulations and compliance is also increasing.

One big particular headache: managing cross-border returns.

According to Statistica, U.S. consumers alone returned $817 billion USD worth of merchandise last year, with 16% of that coming from online purchases. Surprisingly, many consumers actually purchase products online with a plan to return them. Therefore, how can global retailers prepare for this process, especially when it comes to getting their costs under control?

The return rate for eCommerce falls, on average, between 20-30% as consumers can’t see or try products online before buying them. Most of these returns tend to fall into the clothing, shoes and accessories category.

According to the National Retail Federation, for every $1 billion in sales, the average retailer incurs $165 million in merchandise returns. Plus, for every $100 in returned merchandise accepted, they lose $10.40 to return fraud.

These costs can be a major hit for retailers.

Here is another low blow: when items are returned, retailers often pay customs duties twice. This is certainly true in the United Kingdom and the European Union, which have customs duties regulated by the HM Revenue & Customs and the European Commission respectively. While customs duties are calculated based on the value of the product and the category it falls under, typically in the UK retail merchandise falls under a rate of around 12%.

Imagine processing hundreds, thousands or even millions of returns each year which are subject to double payment on customs duties.

How can global retailers successfully manage cross-border returns?

It is no doubt that global eCommerce is a winning strategy for most retailers, and while the challenges of cross-border business and customs can be daunting, it shouldn’t be a burden on a growing business.

According to Reuters, 94% of supply chain professionals face paperwork delays when it comes to cross-border eCommerce. This isn’t surprising given that processes can be different in each region.

Are companies aware that they can claim back duties paid on returned items from the UK and the EU?

Many retailers may be missing out on reclaiming a significant amount of money in the reverse logistics process by claiming back duties paid. This is why global retailers should consider outsourcing parts of the reverse logistics process to qualified and expert professionals that can work directly with tax and customs authorities.

Expert trade and logistics experts work directly with authorities to submit bulk claims for duty free returns and can get them processed more accurately and quicker than global retailers themselves. Claim back processes are specific and only allow a short time window to file those claims.

Is your business one of the many companies doing thousands or millions of dollars of eCommerce business into the UK or EU? According to market data, around a quarter of those purchases are returned, therefore chances are you can claim back thousands, if not millions, of dollars per year.

Trade Duty Refund as your duty free returns partner

Trade Duty Refund helps companies doing business in the UK or EU claim back duties paid on returned items. Using AI-powered technology, trade and logistics expert consultants work with merchants to file bulk claims from a simple list of returned items and claim back money owed quickly.

If global eCommerce is a big part of your business and you foresee more cross-border returns, plan now on how to effectively reclaim customs duties. Schedule a free discovery with TDR to get an estimate of what you can claim back this year and talk with an expert on what to expect in terms of trade and customs regulations this year in the UK and EU.