One of e-commerce’s saving graces is that it has faded the lines of international borders to help increase global trade. But with the increase in trade, there is an increased uncertainty about exactly how much an item is going to cost once it gets to your door. The various world trade agreements may have helped to simplify trade but they have done little to align themselves with the simplicity of point-and-click e-commerce.
A Montreal-based company is doing its part to bring international trade into the 21st century by expanding on the simplicity of Web-based trading to the point of giving you an exact calculation to get a product from point A to point B. tariffic.com’s solution is based on its extensive database of all of the trade agreements between 194 nations of the world. If you are shipping 100 tonnes of mahogany from South East Asia to a factory in Latin America, and then shipping the finished product to Montreal, the database will allow for instant calculations of all of the taxes, tariffs and duties to be paid for the shipments.
“We have developed an artificial intelligence which goes in the database and is able to take into consideration the specific situation, go through all of those tariff treatments and get out exactly the rate that applies,” said Guy Lefebvre, president of tariffic.com.
For the millions of buyers and sellers, the ability to simply click and look to see the final cost is very important, since hidden costs seem to be the norm for e-commerce purchases.
For Jack Maynard, research director with the Aberdeen Group in Boston, simplicity and speed are the key. He said there needs to be a solution which is faster and more efficient than the traditional method of calling up a lawyer to have him or her research the information needed.
“I need to be able to do something in a far more proactive way and have access to the information,” he explained
“It is not just price and availability, I want fully landed costs and end customers want fully landed costs.”
The cost of crossing borders
James Shaver, board member of tariffic.com and former secretary general of the World Customs Organization, cited a Forrester survey which found that 85 per cent of firms have great difficulty filling international orders because the complexities of cross-border trade, and consequently those who are doing business internationally, are limiting their trade to a very few countries.
Lefebvre explained just how complex trade can be even in a region perceived to be more or less tariff-free.
“The European Union has 89 different tariff treatments, so if you want to be in the position to give your customer accurate data, you have to be in the position to make the differentiation,” he said.
“Buyers and sellers aren’t able to conclude transactions [at] on-line marketplaces and business-to-business exchanges without the fear of hidden costs,” Shaver added.
With the challenges of fluctuating currencies, changing taxes and duties and fees, “today we are far from fulfilling the promise of global e-business,” he added.
tariffic.com’s solution can either be purchased by a company to incorporate into its existing Web presence or included as an add-on to a large e-commerce site. Lefebvre sees a third of sales going to large business-to-consumer sites, one-third to marketplace logistic exchange sites, and the final third as an integration into existing software platforms of large multinational corporations.
Greg Runyan, senior analyst with the Yankee Group in Boston, likes the value-added approach for marketplaces.
“It becomes a value-add, it becomes a competitive differentiator for the operator of the marketplace to be able to offer that type of price-visibility with regards to cost,” he said.
“As commerce gets more global, you are going to have to provide that type of information and visibility to your customers,” Runyan added.
Calculating the real cost
tariffic.com gets its up-to-date information directly from all of the participating countries through direct agreements with each to provide tariffic.com with each country’s latest trade information. They have working arrangements with tax experts around the world through direct electronic links that can then be fed into the system in real time. So once a new tax becomes law, the information in the database will be updated instantly.
There is a caveat as to the accuracy of the data, though – tariffic.com does not guarantee the data’s accuracy.
“We don’t (do that) because the countries themselves don’t give any guarantees as to the accuracy,” Lefebvre explained.
He added that countries are reluctant to guarantee their own information since there could be mistakes made by government employees during printing or electronic reproduction.
“Because they can not guarantee the data, we can not guarantee the data,” he said.
The database is ready to go live and will do so as customers sign up. Right now the top 75 trading countries’ tariff information is available. tariffic.com will be adding about 10 to 15 countries a month until 194 countries are available. These countries will represent about 98 per cent of all world trade, according to Levebvre.