In Logistics

Cross-border e-commerce has shown significant growth since the 2010s, mainly influenced by greater internet access provided by the widespread use of smartphones. The great democratization of internet access around the world allowed the growth of electronic commerce, including cross-border, in underdeveloped or developing countries, such as Brazil.

As a complex international trade relationship, cross-border e-commerce has some pillars that enable its existence, operation, and growth. Among them, products must be directed to the needs of customers in consuming countries, marketing campaigns must understand the profile of consumers, the existing financial means to make and receive payments on products/services, import laws and their taxes, the consumption habits of each country and, last but not least, the logistics involved to allow this commercial activity — which we could see with the Covid-19 pandemic that is the most sensitive pillar of international trade. According to Accenture, logistics is the main barrier to the feasibility of cross-border e-commerce, with delivery being the main factor of concern for consumers when shopping at international merchants.

Brazil is a key market for large global marketplaces — with approximately 210 million people — and among people who made online purchases in 2021, 68% say they also bought from international merchants, according to a survey carried out by Ebit and published in the report Webshoppers. Among the websites most sought after by Brazilians for shopping, AliExpress, Wish, Amazon Gearbest and eBay stand out, according to the 2020 Neotrust Report. Also, according to a study developed by Ebit/Nielsen and published by Bank of America, cross-border gross merchandise value in Brazil is estimated at USD4.8 billion, or about 21% of total e-commerce in the country.

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How Brazilians buy online

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The Logistics of Cross-Border E-Commerce in Brazil

The logistical flow of these international transactions has several stages: Supplier’s warehouse, warehouse abroad, port of origin, international transport, port of destination, Customs Center, domestic distribution center, and store/customer. Large merchants such as AliExpress, Amazon, and Wish have robust logistics operations that involve several outsourced partners and their own operations, for example, the Alibaba group (owner of AliExpress) has its own logistics arm, Cainiao. Since 2014, the Brazilian postal service (Correios) and AliExpress have established a partnership to foster the commercial relationship between the two countries, according to Ti Insight.

The period of international transport added to the period of all these internal procedures for releasing the goods and distribution by the Post Office makes cross-border purchases have a long delivery period, which can be one of the main impediments for consumers to choose this modality. As a result, major players have increasingly invested in their logistics operation: according to Infomoney, in 2021 AliExpress invested in proprietary logistics with four weekly chartered planes for the Brazil-China stretch. In addition, when the customer chooses the “AliExpress Direct” method, Cainiao identifies different user purchases and brings them together in a single package at distribution centers, integrating vendors from different countries to improve the customer experience.

Delivery time varies according to the mode chosen on the merchant’s website, for example, simulating a purchase today for an electronic product for BRL75, there is free shipping via AliExpress Standard Shipping (operated by Cainiao on the international stretch and by the Post Office within Brazil) with an estimated period of 38 days. However, there is also the option of shipping via a courier (DHL) with an estimated time of 12 days, but the cost of shipping is BRL531 (7x the value of the product).

When the goods arrive in Brazil, they are sent to the customs centers of the Federal Revenue before formally entering the country. These centers are located in São Paulo, Rio de Janeiro, and Curitiba, and the goods are divided between each one depending on the characteristics of the product. Currently, Curitiba is the main hub, receiving over 300,000 packages a day, according to The Paypers. Upon arrival, the goods undergo a series of inspections before being released for delivery, from x-rays to checking the Invoice and declaration of content.

Correios works with the Federal Revenue in the customs clearance of imported goods based on the “Simplified Taxation Regime (RTS)” for international goods with customs value (product value + freight value + insurance value) of up to USD3,000, upon payment of import tax (60%) and ICMS (depending on the state of destination of the goods). In addition, Brazil’s Post Office instituted the “Postal Dispatch”, a fee charged by the customs handling services of imported international parcels that must be paid by the final consumer so that the goods are released by the Post Office for delivery. Despite the all the rules, the Federal Revenue cannot inspect all products that arrive at customs and, therefore, some pass without being taxed. In 2020, federal officials audited just 2.6% of all cross-border postal shipments, and over 90% of audited shipments were subsequently required to pay tax, according to Labs. According to an article by UOL, often the criterion for inspecting goods or not is the size and weight of the box.

For goods with a customs value greater than USD3,000, the Postal Service will only carry out the transport. In this case, the recipient must hire their own broker so that customs clearance is provided and the payment of other taxes, such as Import Tax, Tax on Industrialized Products (IPI), and Import PIS/Cofins, in addition to the ICMS of the state of destination.

According to Statista, the Brazilian Post Office (Correios) is the leading parcel courier with 51% of the market share, considering cross-border and also local e-commerce. It’s followed by TNT and Total Express, both with 6% of market share, and Directlog (3%), Jadlog (3%), and Gollog (2%).

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Rising Shipping Costs

Although there is some companies moving parcels through airplanes to enhance the customer experience, the sea carries more than 80 percent of the world’s traded goods, according to the International Monetary Fund, and the shock of the pandemic underscored just how crucial the maritime container trade is to the global economy. The result of the challenges imposed by the pandemic was that the cost of shipping a container increased 7x in the 18 months following March 2020, directly impacting the final prices of goods. Even more in taxed goods, as the freight value is added to calculate the customs value, which is the basis for taxation.

Besides maritime transport, the consequences of Covid-19 and the spike on fuels prices also increased prices of air cargo. In addition, the Russia-Ukraine conflict also affected the airspace in the region and, consequently, the operation of flights.

The Bright Side

All these consequences add up and impact the final value of products purchased on cross-border e-commerce. However, according to Alibaba’s quarterly results report, there was an annual growth of 24% in international e-commerce retail. This indicates that, even with all the problems of recent years, cross-border e-commerce continues to grow strongly and the need to count on partners and experts on how to structure and conduct operations is increasingly evident.

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