Finally, you’ve found the perfect supplier for your business needs, but they’re based overseas. You land a big new client, but you need to get your goods to the other side of the world. Doing business in the modern world invariably leads to dealing with cross-border logistics.
There’s no getting around it, things can get complicated when transferring money or goods across international borders. Cross-border logistics refers to the challenges associated with the control, compliance, and regulatory requirements of border operations. The subject is inherently linked to complicated trade laws and customs policies.
This article won’t focus on the fine print of custom rules for specific countries around the world. Instead, it will concentrate on common issues that SMBs looking to operate across borders, in particular, payment and shipping challenges.
SMB cross-border payment challenges
The digital marketplace has opened the door to businesses of all sizes to operate internationally, and the volume of B2B cross-border payments is seeing significant growth. In 2020, 43% of SMBs conducted international business, an increase from 34% in 2019.
Banks have traditionally been the gatekeepers of B2B cross-border payments. However, their services were typically catered towards larger corporations. Smaller businesses were left behind, having to deal with banks that have slower processes with hard-to-navigate banking platforms and higher fees.
Making a B2B cross-border payment is far less advanced than the online consumer experience. While many SMBs have turned to electronic fund transfers (EFT), such as automated clearing house (ACH) for domestic payments, these don’t translate to international payments. ACH benefits for SMBs can save you time and money, but you can’t use them to pay your international vendors.
International payment options for SMBs
The most common options available for cross-border payments are:
- International wire transfers through a bank.
- A letter of credit.
- Global payment services.
While global services offering B2B payments have the lowest fees associated with them, finding a reputable platform to work with can be confusing. Take the time and research service providers to find a credible and secure option.
The cross-border shipping headache
Modern supply chain management can be a logistical nightmare. While dealing with global policies that change over time, it can feel impossible to maintain consistent best practices for cross-border shipping.
Moving goods across borders fluctuate with global economic factors. Costs change as governments decide on new tariffs, and regulations to best suit their current needs. The best thing to do when dealing with cross-border shipping is to expect the unexpected.
Major challenges to overcome include:
- Logistics: Physically getting products from point a to point b. International shipping is notoriously known for delays and order tracking difficulties.
- Tariffs: Rising taxes imposed by governments can increase the price of specific shipments and slow down the movement of goods across borders.
- Customs compliance: Border checks ensure goods that come into a country are safe. However, every country has its own policies to consider.
The leading cause of delays during cross-border shipping is product misclassification. You can reduce the chances of an issue at customs by promptly paying all taxes and fees and providing accurate documentation. This includes:
- Item classification codes.
- Clear product descriptions.
- Correctly labeling goods, including their value and quantity.
- Packaging goods appropriately.
- Meeting all restrictions and regulations for the relevant countries.
Outsourcing cross-border logistics
Instead of dealing with the logistical nightmare themselves, many SMBs choose to outsource the process to organizations with experience. Third-party logistics (3PL) companies can help with many aspects of cross-border shipping, taking over border issues, tracking orders, and potentially lowering costs.
Rather than getting lost in a sea of paperwork and navigating between different shipping partners, 3PL means your SMB has a single point of contact overseeing the transport of your products.
Other cross-border logistical challenges
While payments and shipping cover many SMB concerns when it comes to cross-border transactions, they aren’t the only challenges you need to consider:
- Global supply chain problems: The pandemic caused significant supply chain issues that persist to this day. A lack of raw materials, lower availability of shipping containers, and a shortage of workers have led to continual delays and in some cases canceled orders.
- Return policies: Providing and receiving refunds can be frustrating for domestic orders. Cross-border logistics, can take it to a whole other level.
- Customer expectations: Thanks to online shopping and greater connectivity, the world has shrunk considerably over recent years. Consumers now expect a seamless shopping experience regardless of where they purchase from. They have little patience for your cross-border logistical problems and want their products to arrive as quickly as possible. Whether it’s cheap and fast shipping or a straightforward returns policy, customer expectations now mean international SMBs require robust cross-border logistics.
Online shopping means consumers are now happy to purchase from international brands. But tapping into that market means overcoming the sometimes considerable challenges of cross-border logistics. While not always easy, with effective procedures in place and the right partners by your side, you can take your business international.
