Everything that Indian cross-border sellers should know about landed costs

Summary-

• Indian sellers selling to another country have to face multiple challenges.
• They need a strategy in place to get timely compliance done and keep the customers happy.
• Landed costs are total costs incurred to deliver the goods to their destination. They include shipping expenses, customs duty, customs fees, VAT, sales tax, insurance and other miscellaneous costs.
• The knowledge of landed costs would help Indian sellers in executing logistics and compliance while selling to another country. This blog will help you understand everything you need to know about landed costs.

If you are thinking of expanding your business, venturing into the international markets could be the thing for you. You may either find more unique markets or find a specific opportunity that wasn’t available in the domestic ones. More and more Indian sellers are taking a spontaneous deep dive into the international markets. But as easy as it seems to venture into cross border selling, logistics and compliance hit sellers when they least expect it. More often than not, these sellers don’t have a strategy in place to deal with them, and they have to pay a higher price for that.

Sellers who wish to fare well in the global markets have to take care of two things.

1) Get timely compliance done.
2) Ensure that they attract new customers.
3) Ensure that all the old and new customers are satisfied.

Both the buyers and sellers are just a few clicks away from each other while making the deal. But the real challenges begin when the product is to be shipped. If you are shipping within the domestic borders, the steps involved are shipping the product, paying the local taxes, confirming delivery and receiving the payment. It is as simple as it can be. But when a seller sells across borders, the steps multiply, and so does the complexity of compliance.

The steps include

• international shipping
• use of Tariff codes for calculating taxes
• waiting for clearance at customs
• paying import taxes
• sending it to the customers.

There is no denying that these complexities seem intimidating. The least a seller selling to another country can do is ensure that the buyer knows the total expense of the product to them. If the buyers do not know that they are going to be charged at customs or if there are any hidden charges, the buyers might abandon the cart. In cases like these, sellers also have to pay for shipping back the goods to themselves, which becomes a costly affair. This is where the question of landed costs arises. Landed costs are the total costs incurred in getting a shipment to its destination. They usually include the cost of goods, door to door shipping, insurance fees, if any, customs duties, import taxes and other miscellaneous fees and taxes. In short, the total cost to the customer is the landed cost.

Calculating landed costs is the tricky part because a lot of other things are involved in their calculation. Tax regulations are changing, too. But if a seller manages to overcome the difficulties, selling into another country can bring business success.

The following are the things that every Indian seller should consider while calculating landed costs.

1. Shipping costs-
   These costs include expenses incurred on shipping the goods via postal service, freight or courier, whichever option you pick.
2. Customs Duty-
   Customs duty is the tax charged every time you sell from one country to another. They are to protect the interests of local sellers and to generate revenue for the government. Imported goods become more expensive than the local ones. Harmonized system codes, also known as HS codes, are used to determine the rates of customs duty.
3. Customs costs-
   Brokers usually charge custom fees in addition to the duties. These include processing fees and miscellaneous processing expenditures charged by customs officials or private customs brokers.
4. VAT, sales tax or other taxes-
   Apart from duties, you might have to pay other taxes like VAT, sales tax and other taxes.
   These also need to be included in your calculation of landed costs.

We keep posting blogs for international sellers to help them in staying up to date with the changing fiscal policies and know-hows. Read more on the EU’s IOSS scheme here. Avalara helps businesses of all sizes overcome tax complexities. Our cross border solutions help companies overcome roadblocks in selling from one country to another. With Avalara, you can automate compliance, calculate duties within no time. Find out how Avalara can help your business grow by making compliance easy for you.