Everything You Need to Know About Shipping to Southeast Asia
Southeast Asia has been heralded as the next land of opportunity for e-commerce, comprising growing markets such as Indonesia, the Philippines and Malaysia, as well as global hubs like Singapore. The resultant effect of physical store closures during the COVID-19 pandemic has propelled Southeast Asian consumers to spend more time online, with close to 40 million people across 6 countries in the region adopting new internet usage habits in 2020. In terms of e-commerce growth potential, the region is projected to grow by 20.6% at an absolute amount of $89.67 billion in 2022 – the highest globally as of the time of this writing.
To get a slice of the pie, delving deeper into each leg of the end-to-end shipping process is especially important when delivering to a region of a highly-fragmented nature. Though customs documentations and regulations might differ across countries, having a strong foundation of the overall procedure can help logistic professionals to make more informed decisions about their supply chain set-up amidst other changing factors.
First Mile Delivery
First mile delivery in international shipping is where your order leaves your origin address for your shipping partner’s local warehouse. The origin address can be a storefront, office, or warehouse belonging to you or your supplier. Before your goods leave the origin address, the products have to be packaged and labelled appropriately to facilitate smooth cross-border shipping.
This guide provides a general framework for shipping anywhere into Southeast Asia, but for the purposes of this article, we will use Hong Kong SAR as our origin. Major hubs like China and Hong Kong are usually the primary choice for merchants looking to ship into Southeast Asia.
Goods from areas near Hong Kong, like Shenzhen, may also be trucked to Hong Kong for export. Hong Kong has more business-friendly regulations and policies, which makes importing and exporting from here smoother and faster compared to exporting certain types of goods directly out of the mainland.
When shipping loose parcels, they’ll need to be consolidated at your shipping partners’ warehouse. In the warehouse, they’ll be consolidated into pallets for air freight.
While transporting your goods, your packages may go through bumpy rides such as turbulence during flights. Having padding like bubble wrap or packing peanuts is recommended particularly for fragile items. This reduces the chance of your goods bouncing around in the packaging or getting damaged during shipping. On top of that, you need to ensure that your shipping labels and customs documents are labelled clearly and accessible for customs inspection.
When you’re ready to hand over your shipments to your logistics partner, you can have it picked up from your address or dropped off your shipment at your shipping partner’s drop-off point. Most shipping partners would have a cut-off time for submitting orders so that they can optimize their route.
B2C parcels will typically be consolidated at a transportation hub along with other packages with the same destination country prior to customs clearance. Otherwise, B2B shipments can be transported directly to the origin warehouse for customs clearance since they already make up a larger weight and volume compared to individual B2C shipments.
Origin Customs Clearance
Once your orders are consolidated at your partner’s warehouse, the shipment will head to your logistics service provider’s air cargo agent’s warehouse or one of your logistics service provider’s warehouses depending on your mode of freight.
At the airport, officers will inspect your shipment and the associated customs documents to see if they can be cleared for export. The documents that are usually needed for customs clearance at this stage are:
Bill of lading/ Airway Bill
Please be reminded to check your local export requirements with your respective customs departments as this above list only acts as a general guideline.
As a case in point, exporting from Hong Kong requires you to have an export permit before you can ship your goods out. Additionally, if you’re shipping any restricted goods, you’ll need to apply for a special export permit for these goods before they can be exported.
Mid-Mile (Air Freight)
After checking these documents and clearing your shipments for export, your shipments can be uplifted onto a plane. For merchants shipping B2C parcels, air freight is the faster option, especially if you’re testing a new eCommerce market and need to ensure that your parcels reach your customers quickly.
Air freight is the preferred mode of transport for B2C eCommerce merchants thanks to its speed. However, when extraordinary circumstances such as the recent COVID-19 pandemic occur, flights could be limited, causing the price for air freight to increase from the lack of cargo space. The flight limitations may also lead to delays in delivery speeds.
Destination Customs Clearance
1. Shipping Regulations Across Major Southeast Asia Markets
Regulations vary depending on which country you are shipping to and from. Ensure that you are aware of the licenses required, special provisions, and restricted and prohibited goods for each country you are shipping in and out of. Most countries also require importers to register with the relevant trade or government authorities and obtain customs identification numbers.
In most cases, importing items into countries would require registration for required permits and licenses. For eCommerce merchants who do not have these permits and licenses, you have the option of using shipping partners as importers of record.
If you are planning on importing goods into Southeast Asian countries using your own company, find out each country’s import regulations via the links below:
2. Documentation Across Major Southeast Asia Markets
Ensure that you have the right set of documents as well as confirm that all necessary information has been included in these documents in advance. Inaccurate or missing documents may lead to delays at customs clearance.
Usually, the documentation you would need to pass to your shipping partner is the following:
The commercial invoice lists the total shipment value. Helps to determine the import duties and taxes, and eligibility of shipment.
The packing list gives product details and shipment volume in kilograms (KG) or cubic metres (CBM), and serves as a checklist to ensure shipment has been packed correctly or not.
Volumetric dimensions of your package are often required on shipping-related documents, which can be calculated using this formula:
3. Restricted & Prohibited Goods
Each country has its own list of goods that require additional regulations to comply with or the shipment cannot enter the country at all. These items are usually prohibited or restricted in most countries in Southeast Asia:
Anti-government, seditious material, or politically sensitive materials
Narcotics or recreational drugs
Firearms, explosives, ammunition
For restricted items, you may need additional permits, licenses which your shipping partner can help you with. Certain restricted items are also subject to higher tariffs or duties.
Find out each country’s list of restricted and prohibited goods below:
4. Duties & Taxes
Your goods will be charged different import duties and taxes vary depending on where you are shipping to, your shipment’s value, and the type of goods you are shipping.
To ensure that you are aware of how much you or the customer will have to pay, it’s vital to understand how these factors affect the taxes payable.
Each country has a different set of taxes and duties. The most common types of taxes are:
This is based on whether your importer is registered with the country or not. In some countries like Indonesia, this tax charges unregistered importers more than registered importers.
Import duties are a tax collected on imports by a country’s customs authority that is usually a percentage of the imported good’s value. The import duty tariff also depends on your product’s Harmonised System Code (HS Code).
HS Code is an internationally agreed special code assigned to each type of commodity to help Customs identify the product category you are shipping.
Value-Added Tax (VAT)
Also known as GST or Sales and Services Tax depending on the country. This is an indirect tax on the consumption of goods or services by the people, collected by the merchant on behalf of the government.
The value of shipment that is declared for customs by the shipper to serve as the basis for computation of duties and taxes.
Type of Goods Shipped
Goods are taxed differently depending on their commodity type. For instance, some countries won’t have a tax on electronics like computers but would place higher taxes on luxuries like jewellery or perfumes.
Find out the HS code and/or tariff percentage for your type of commodity at the official customs pages below:
5. Calculating Import Tax and Factoring in De Minimis Rulings
In some countries, there is a threshold below which fewer or no taxes are charged on shipments, known as the de minimis value. In some cases, duties won’t be charged, but taxes will. It is vital to look through the official updates from the countries’ customs and tax divisions, which we have provided in the links below.
For instance, Indonesia’s de minimis value is USD 3. If you are importing a bag valued at USD 60 to Indonesia, this bag will be charged taxes and duties.
You can find out each country’s de minimis values and taxes below:
Best Practices for Customs Clearance
The ideal customs clearance scenario has your goods processed through customs quickly and without issue. A smooth customs clearance process can complement your online shopping experience giving your shoppers peace of mind.
Here are some customs clearance tips and tricks that can help you deliver that experience.
1. Delivery Duties Paid (DDP)
Delivery Duties Paid is highly recommended to improve the customer experience. This means that the import duties and taxes are paid before the shipment arrives at your customer’s doorstep. If the taxes aren’t paid up front, the customer will need to be informed that they need to pay additional costs for the item to be released from customs.
Some logistics carriers offer this service so that your end customers do not have to pay for the duties and taxes to be imposed. If needed, there are partners who will offer to pay these duties on your behalf and charge it back to you later.
2. Local Expertise
Engage a shipping partner who has experience in cross-border shipping to your destination country. Take advantage of the local knowledge that they have to offer to avoid unnecessary shipment delays.
You can look out for shipping partners who have established a pre-clearance process with customs authorities in Southeast Asia.
This process allows shipments to clear customs faster as all the relevant information is sent to the customs before the shipment batch even arrives in the country. By doing this, customs can then allow the entire batch to pass through customs as soon as it arrives or earmark particular shipments that need further review.
4. Real-time Delivery Tracking
Parcels could get lost in the complex web of supply chains when it comes to cross-border shipping. To ensure that your shipment has arrived safely at its destination, engage a carrier that provides real-time track and trace.
Experienced shippers will also have processes in place to help provide accurate estimates of the final delivery time. This way you will also know where the parcel is at every step and can update your customers should they ask for an update on its location.
5. Digital Commercial Invoice
It is important to prepare a commercial invoice that is complete with the necessary information to ensure a smooth shipping experience. Having a digitised process through your partner’s online portal to generate these invoices will help to reduce administrative time and costs, speeding up the shipping process for you.
6. Duties and Tax Advancement
Some shipping partners go the extra mile by offering to cover the duties and taxes for you first so that your shipment can breeze through customs clearance, otherwise known as Delivery Duties Paid discussed above. This helps your parcels clear customs sooner and your shoppers receiving their goods sooner as well.
Distribution and Last Mile
Last mile delivery is the final leg of a parcel’s delivery journey, usually from the distribution warehouse to the customer’s chosen address.
Getting last mile delivery right in a region like Southeast Asia with highly fragmented geography may not be easy, but its benefits to your brand are definitely worth the effort. Depending on your target country, certain additional flights or delivery methods may be required. These include additional flights to other main islands in places like the Philippines or Indonesia, both of which are archipelagic countries.
If you’ve offered parcel tracking with your online delivery, customers will know which stage of the delivery their parcel is at. It represents a chance for a brand or eCommerce store to leave a lasting impression as it’s one of the few touch points where the customer interacts with your product and service staff.
If a company is able to craft a seamless and memorable experience every time a customer receives and opens their parcel, it can strengthen a store’s brand image. However, nothing is more annoying to consumers than receiving a late, damaged, or missing parcel. If the product arrives late or damaged, things could get challenging for your brand image quite quickly.
Merchants can strive towards efficient last mile coverage by working with local delivery companies who specialise in a country’s specific region. Additionally, managing a network of these partners is key to getting the best rates and performance for one’s deliveries.
To select the right players and for ease of management, merchants can look to utilising 4th Party Logistics (4PL) solutions to manage extensive partner networks through one touch point and make better informed, data-driven decisions for a more optimised supply chain set-up.
Janio Asia is a cross-border logistics service provider that simplifies e-commerce deliveries in Southeast Asia. Combining technology with market knowledge, Janio provides an effective end-to-end logistics solution, including international cash-on-delivery and customs clearance, where shippers can manage international shipments on a single platform. For more information, please visit https://www.janio.asia.
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