Selling products on online platforms
Selling products on online platforms has become increasingly popular, especially on Amazon.com and Ebay. It seems there are endless opportunities when you decide to go into online sales.
The Internet has made it easy to find and purchase items from almost anywhere in the world. However, many people are discovering that getting a foreign-bought item successfully delivered to the United States is much more complicated. The NBSO also get a lot of questions from entrepreneurs looking for opportunities to sell their products through online platforms in de US. Let’s have a look at the most frequent questions.
When goods move from any foreign country to the United States, they are being IMPORTED. There are specific rules and regulations that govern the act of importing – and they can be extremely complex and confusing – and costly. In other words, “Buyer, Beware.” When you buy goods from foreign sources, you become the importer. And it is the importer – in this case, YOU- who is responsible for assuring that the goods comply with a variety of both state and federal government import regulations. Importing goods that are unsafe, that fail to meet health code requirements, or that violate quota restrictions could end up costing you quite a bit of money in fines and penalties. At the very least, such goods would be detained, and possibly destroyed, by CBP.
It does not matter whether you bought the item from an established business or from an individual selling item in an on-line auction. If merchandise, used or new, is imported into the United States, it must clear CBP and may be subject to the payment of duty as well as to whatever rules and regulations govern the importation of that particular product into the United States.
How to start?
One of the questions we receive the most is: ‘Can I sell on international platforms in the US as an international seller’ and the answer is simply put ‘Yes, you can’. In selling online products, you have four options:
- Using a customs broker acting as the ultimate addressee. No EIN (US Tax Payer Number) is needed. Customs brokers are private individuals, partnerships, associations, or corporations licensed, regulated, and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports. The ultimate addressee is the person or company who receives the goods for end use, or the person or company listed on the export license, also called the ultimate consignee.
- Using a courier service like DHL/UPS/FedEx etc. EIN recommended.
- Using a prepping and forwarding company that acts as the ultimate addressee, there is no EIN needed.
- Using a forwarding company/customs broker when delivery by regular Air or Sea shipment (not by courier) and acting as the Importer of record and ultimate addressee yourself. EIN needed.
As a foreign importer, you do not need an EIN number for Customs Import purposes. You may need one as a seller on the online platform for State Tax purposes. Please check with Amazon and/or the Internal Revenue Service (IRS). You can be an importer without an EIN#. Customs will assign to you an Importer Number. But you still need a Customs Broker and an Ultimate Addressee with an EIN#. The following link will help you to apply for an EIN: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN.
Let’s have a closer look at the four options:
1. Using a customs broker acting as the ultimate addressee
If your shipment is arriving by Regular Air Cargo (not by DHL, UPS, or FEDEX) or Ocean cargo, you will need a Customs Broker to clear the shipment on your behalf. All shipments must be cleared through Customs. Certain commodities are also subject to the regulations of other government agencies such as FDA (Food and Drug Administration), USDA (United States Department of Agriculture), DOT (Department of Transportation) and EPA (United States Environmental Protection Agency). There are several companies in the US that can act as your customs broker and ultimate addressee.
Customs requires a Customs Bond; a bond need to be posted with every ISF and Customs Entry to ensure that all duties, taxes and fees owed to the federal government will be paid. ISF stands for Importer Security Filling and needs to be done at least 24 hours prior to the vessel’s departure from origin. An Annual Continuous Bond can be purchased for $500 and it will cover both your ISF filings and Customs Entries. Having a Continuous Bond also reduces our ISF filing fee by $25. If you choose not to purchase a Continuous Bond, you have the option of purchasing Single Entry Bonds for ISF filings and Customs entries. This can become quite costly especially if your shipment value is high or is subject to other government regulations such as FDA. Furthermore, the bonding companies only allow a maximum of 5 Single Entry Bonds for ISF before the importer is required to purchase a Continuous Bond. You would be saving money in the long run. However, if you are planning to import only once, then a Single Entry Bond might be for you. Single Entry Bonds are subject to a $25 Bond Processing Fee.
In the case you are working with a supplier for your good, your online business adventure will start once you found your supplier:
- Production begins (seller might send you a sample for approval)
- Determine if you will be using the services of an inspection intermediary service, or if you will do the quality inspections by yourself.
- Seller arranges the International Freight Forwarding if his cost includes this (CIF terms); if his cost does not include this, then you are responsible for arranging and paying for the freight.
- Your supplier may have a couple of shipping companies to refer you to. You will also want to include the U.S. destination address – whether it’s Amazon FBA or the Intermediary Inspection service of your choice.
- Hire a Customs Broker if separate from the Freight Forwarder.
- Get ISF (the before mentioned Importer Security Filling) details to Customs Broker (ocean shipments only. This filing provides information to Customs regarding the impending import shipment. No filing means your shipment will not clear customs.
- Shipment departs. If you are doubting whether to use ocean or air shipping, your decision should be based on how quickly you need your shipment and how much you are willing to pay:
- Ocean shipments are less expensive but take longer to arrive. The costs are generally 1/2 – 1/3 the costs to ship by air. You should figure approximately 3 – 4 weeks lead time.
- Air shipments are more expensive but are faster to arrive. You should figure approximately 3 – 5 days’ lead time.
- Send copies of all shipping documents to Customs Broker
- Shipment arrives
- Customs clears. It will take at least 48-72 hours for Customs to clear the shipment.
- Invoice is paid
- Shipment is delivered or dispatched
2. Using a courier service like DHL, UPS, FedEx etc. (EIN recommended)
Air Express Courier shipments sent via DHL, FEDEX, or UPS are different. Customs has special regulations for them where they are allowed to clear entire mass quantities of shipments under their own name and Customs bond. They simply move too many parcels for Customs to be able to clear every single one. Therefore, they are authorized to clear shipments that are on one cargo manifest of low risk up to values of their own discretion. They also won’t ask you to apply for a customs bond or filling an ISF. They provide a one-stop solution and are therefore more expensive than forwarding or logistics companies/customs brokers.
You are the Importer of Record with your foreign address or you can subscribe to services like http://www.usamail1.com/ to get an US address (not obligatory) and apply for an EIN here (obligatory if you want to be the ultimate addressee): https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN.
3. Using a prepping and forwarding company that acts as the ultimate addressee (NO EIN needed)
There are several services around that receive your goods (where you act as the Importer of Record) after being cleared by customs. For example, if you send in your order by courier (DHL etc.) and then want them prepped, labeled etc. you can use prepping companies that can also act as your ultimate addressee. These guys are similar like the first example but usually don’t clear customs for you. You can act as the Importer of Record with a foreign address and will be assigned an Importer Number by customs. Once the prepping, labeling etc. is done these service providers will send in the order for you to Amazon.
4. Using a forwarding company/customs broker and acting as the Importer of Record yourself (Amazon’s EIN needed)
If you send items by Air or Sea the regular way (meaning no courier like DHL, UPS etc.) you will need a forwarding or also referred to as Third-party logistics company (3PL) that can act as both the forwarder as well as the customs broker HOWEVER not as the ultimate consignee.
In this case, you will be the Importer of Record and Amazon will be the Ultimate addressee. You don’t need an address or bank account in the US but you will need an EIN number of the ultimate addressee or Importer of Record. Like option 2, you can be the Importer of Record with your foreign address or you can subscribe to services like http://www.usamail1.com/ to get an US address (not obligatory) and apply for an EIN here (obligatory if you want to be the ultimate consignee): https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-to-Apply-for-an-EIN
Frequently Asked Questions
Do I need a Credit History in the US?
No, this is only important if you want to borrow money or rent a place. Issues of the State Sales Tax and Product Liability Insurance are two things you should also keep in mind.
Do I have to pay Sales Tax?
Sales tax will depend on where the company is located, where you are selling to, and where their product is stored. For more information on taxes: http://ustax.bz/non-us-entrepreneurs/.
There is no sales tax in the following five states:
- New Hampshire
What about my product liability insurance?
The product liability insurance will depend entirely on your product and your sales volume. If you sell goods like baby toys or coffee mugs it is wise to get a product liability insurance.
For more information on product requirements and an overview of agencies in the Netherlands that can provide certificates for exporting goods to the United States, visit the website of Rijksdienst voor Ondernemend Nederland (RvO). http://www.rvo.nl/onderwerpen/internationaal-ondernemen/landenoverzicht/verenigde-staten/producteisen.
What are my options for an online account?
The two most well-known online platforms for selling goods are Amazon.com and eBay. When you have an online account with eBay, you have two options to sell your products:
- Via an Auction for unique items
- Via Set Price for higher volume standard product (in this case you can use a 3PL service like Red Stag [http://redstagfulfillment.com/] to fulfill your orders, this also applies to any other online store including Amazon)
When you have an online account with Amazon, you can only sell your products through Set Price only. A seller can choose to ship the item themselves (or via their Third Party Logistics Company (3PL) who stores, pack and ship the items to customers), this is known as Fulfilled By Merchant (FBM). You can also send the items directly to Amazon (must be packed and labeled according to Amazon specifications) and this is known as Fulfilled By Amazon (FBA), in this way Amazon acts as both the marketplace and the 3PL.
Generally speaking, for products listed on Amazon.com, FBA is better, and FBA can be used as the 3PL for other platforms, with the exception of Walmart.com.
What are the fees?
A rule of thumb for a $15 item, eBay will take 10%, and Amazon will take 20-50% of that amount. The reason for this fee difference is relative to the service provided and customer exposure.
What are the Differences between Amazon and Ebay?
eBay is a good testing platform to see if your product will sell or to dump cheaper products. It is comparable to a dollar store, flea market, and Walmart. There can be numerous sellers of the same item, with different listings for each seller, which can be confusing for buyers.
Amazon on the other hand has tried to offer a more uniform customer experience. They only want one listing for an item, with Customers able to choose which Seller to buy from. This makes it easier for a customer to just select the cheapest/fastest/5-star Seller. From a Seller’s perspective, Amazon is less forgiving if you make a mistake, don’t use the right labels, or create an “unclean” listing. With selling products on Amazon, accuracy is needed.