Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree (Part 4)

Sramana Mitra: It sounds like there are three or four different aspects that are issues. One is the payment and the whole currency management aspect. The other is shipping and who is considered as a trusted source for shipping.

Brian Dhatt: On the shipping and the compliance side, that’s a big deal to folks. The typical experience was you would either receive a notice from a customs body that says they’re holding your package until you pay more, or you would actually receive the item and then some weeks later, receive a bill from the government. That’s a horrible experience especially when you don’t know in advance what that bill is going to look like. We moved to a model where we moved that pricing right up front. You see it as part of the transaction. The item shows up on your doorstep just like it should without any additional problems. It’s the same for restricted items.

Another experience we hear from a lot of consumers is they find that items get turned away by customs. We pre-clear all of the items so that we know we are shipping items that can be imported into a country. An example I’d like to use is in Spain, you can’t ship playing cards cross-border because they’re a gambling implement. Those would get turned around at the border. These are the types of things we figure out ahead of time so that you’re never transacting on a product which you can’t actually receive.

Sramana Mitra: In terms of how you deal with the customs aspect, not just what’s allowed and what’s not allowed, how is the customs issue being dealt with in international cross-border commerce?

Brian Dhatt: There’s two models. You can deliver duties paid or unpaid. Unpaid is the most common model where somebody hands it over to UPS or the postal carrier. That’s where you have that broker rate on the product saying, “This is classified as this type of item. That has a 20% inbound duty.” We see countries that have duties of as much as 50% to 100%. Delivered unpaid is typically seen as a very risky model from a consumer perspective because once you’ve actually laid down your money for that item and the item is sitting in a warehouse in your country, you’re really stuck with that bill. That’s why we went to a duties paid model where we estimate the duties to the best of our abilities, knowing we haven’t seen the inventory ahead of time. We’ll take the duties from the consumer, deliver the item, and then if we’ve gotten wrong on anything on that – meaning we get charged double or triple for duties on that time – we actually take responsibility for that and absorb that internally.

This segment is part 4 in the series : Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree
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