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Parcel stuck at customs? Slapped with additional GST? Permit rejected?
These nightmare scenarios are rather common for Malaysian SMEs, especially those starting to ship internationally by themselves. Besides delayed shipment and additional expense, the SME also incurs lasting reputational damage with their new overseas customers should anything go wrong.
Having worked with SMEs all around the world for decades, DHL Express has become an expert at helping small businesses deliver reliably, on-time, and without breaking their budgets. Here are our top 10 tips for Malaysian SMEs shipping overseas:
Tip #1 – Different countries, different customs regulations
Malaysian SMEs often make the mistake of assuming the same customs regulations apply in other countries. Then they often get a rude shock when their parcels do not get through customs.
This rather costly learning curve can be cut short by working with an experienced logistics service provider. Being very familiar with the customs regulations across the world, the service provider saves SMEs the pain of making costly mistakes early in their international business journey. This also gives the SME the confidence to make important business decisions, knowing that the shipping part is well taken care of.
Tip #2 – Correctly estimate the time & cost to deliver a parcel
This is the most basic and also the most commonly neglected aspect of international shipping. For SMEs just starting their international business journey, wrongly estimating the time and cost required to send a parcel overseas is understandable. But it is also avoidable.
Major global courier services like DHL Express provide web-based tools to calculate exactly how much the shipping will cost and how long it will take. For example, using the online tool, if you drop off a parcel weighing 500g to DHL in Subang Jaya on Tuesday afternoon, in a 33x34x35 cm box, it is expected to reach Melbourne before 5pm on Thursday, and the total cost will be RM100 (including GST). Taking out the guesswork means no unpleasant surprises!
Tip #3 – Use the right packaging
Another common mistake is using the wrong packaging – too big, too small, too flimsy, not enough cushioning, etc. All these mistakes can be costly. For example, too big a box can lead to higher transport charges. Not enough cushioning can lead to damaged goods and angry customers. It usually takes some trial and error to find the optimum packaging for each type of product. To cut short the learning curve, SMEs can partner with experienced logistics service providers who can provide advice on the right packaging to use.
Tip #4 – Label correctly
Goods often get held up at customs because they’re not labelled correctly or completely. In fact, many SMEs label by hand but this is highly discouraged as handwriting is often illegible and does not look as professional as a typed label. Make absolutely sure the destination address and sender’s address is clearly stated on the label in its appropriate section. The sender’s address (i.e. your address) is needed in case the parcel needs to be returned or the sender needs to be contacted. Do not use any short forms or abbreviations in the addresses. While you may be tempted to reuse old boxes, it is not advisable to do so they may not be in the best conditions and leftover old labels can cause confusion during the process of delivery. It is always best to use a new box with printed labels.
Special labelling is required for restricted items. To learn how to label your parcels for these items correctly, the best route is to refer to the specific government agency that regulates the product, like the National Pharmaceutical Regulatory Agency for pharmaceuticals or cosmetics. For overseas regulatory requirements, exporters can contact the Malaysia External Trade Development Corporation (MATRADE) for assistance.
Tip #5 – Apply the correct taxes and duties
For countries charging GST (Goods & Services Tax) or VAT (Value Added Tax), importers often do not include the duties incurred into the customs value before determining the actual GST or VAT upon importation. Many SMEs also do not have the technical know-how to classify their goods using the Harmonised System (HS) Codes used by most customs authorities to determine the duties and taxes incurred. Note that shipment valuation can also impact the duties and taxes payable and this can cause confusion to SMEs.
While it may be tempting to declare the lowest value for GST or VAT, the likely consequence is delay and additional expense. Work with the customs authorities to determine exactly how GST or VAT is calculated and fully declare this.
For established logistics service providers, the proper calculation of GST or VAT is a given. They may also be able to advise the SME on the taxes applicable due to changes in government regulation. For example, Malaysia has just implemented the Customs Duties Order 2017 which is aligned with the World Customs Organization. Also, Malaysia launched the National eCommerce Strategic Roadmap in October 2016.
Tip #6 – Restricted items & items requiring special licenses
Because customs regulations are so complex for restricted items like medicines and agricultural products, some SMEs try their luck by skimping on the paperwork. This often results in goods getting bonded at customs due to insufficient permits, licenses, approvals or labelling. And this usually leads to delays, and additional storage or clearance costs.
Skimping on paperwork can also lead to negative risk profiling by the customs authorities in the importing country (i.e. the importer and exporter put on a blacklist) with wide ranging consequences.
SMEs have to realise that shipping across borders is a very different kettle of fish from domestic delivery. Most advanced countries are very wary of smuggling, money laundering, the spread of infectious diseases and the threat of terrorism, and have considerably beefed up their borders to keep these elements out. Without the often tedious approvals from the relevant authorities in the destination countries, counter-checked with customers, restricted items are very likely to be stopped at the border. SMEs have to learn to work closely with their customers to get the necessary approvals and the necessary documents before even attempting to ship certain items.
Tip #7 – Security and insurance
When you’re just starting to ship internationally, it is wise to opt for a higher level of security for your parcel. Some logistics service providers have in-house security departments which are accredited with customs authorities in many countries worldwide. This gives the SME the peace of mind that their parcels are safe and even if something happens, there is a proper channel for the incident to reported, tracked and resolved.
Every year, all over the world, billions of dollars’ worth of goods are damaged, lost or stolen during shipment. In such cases, under international carriage conventions, the compensation you’re entitled is normally calculated against a ‘limited liability clause’ assessed by weight, not value. If your parcel contains something valuable, this means your compensation is likely to be much less than its commercial value.
We would strongly advise that SMEs insure their parcels. For a competitive premium, most logistics service providers will cover your freight against loss or damage from any external cause. Find out more here.
Tip #8 – Understand common customs terminology
Whether inbound or outbound, exact compliance with customs regulations is a must. However, different countries have different rules. And, even when the rules look the same, the terms used by different countries can be defined differently. And then there is the sheer volume and complexity of customs regulations in most countries.
For example, the “HS” in HS code stands for Harmonised System code, an international system to classify goods published by the World Customs Organization. Do make the effort to deeply understand international shipping terms and abbreviations, as they affect which party pays for what and which party bears responsibility for the parcel. Some other common terms can be found here.
Tip #9 – Consult helpful websites on customs regulations
There is a wealth of information freely available online on customs regulations. All major logistics service providers provide guides on customs regulations, including those for specific major markets like China. For a more in-depth training, SMEs may want their staff to undergo courses on customs procedures: these courses can help contextualise customs requirements when shipping specific goods between Malaysia and overseas markets.
Tip #10 – Consider outsourcing in the early stages
International shipping is a veritable minefield for newbies, and getting through customs is one major area to trip up. For SMEs, it is best to outsource the international shipping function in the initial stages. Over the long term, SMEs may also find that outsourcing still makes good economic sense, freeing the company to focus on their core competency.
Most SMEs start out trying to ship internationally all by themselves, hoping to save cost. It is only after making many costly mistakes do they consider outsourcing. One such example of is Creativize, a Malaysian SME selling decals and custom stickers. Early on in their business they would manually pack their packages, handwrite on their labels and queue at the post office to have their packages delivered. Their manual methods created several challenges as their packages were often lost, and their resources which could have been better spent on growing their operations ended up being channelled towards queuing at the post office and troubleshooting lost packages. Eventually, Creativize partnered with DHL Express to streamline their delivery process – causing the business’ sales to skyrocket within a year. You can read their full story here.
Outsourcing may seem like a “quick fix”, but in the fast-paced world of cross-border fulfilment the fastest solutions are often the best. By working hand-in-hand with a logistics expert, local SMEs will see a great return of investment as they can better serve their customers and channel more of their time and efforts into growing their business.
DHL Express – Time Definite – Time-Critical Pickup and Delivery
DHL Express – Packaging Advice
National Pharmaceutical Regulatory Agency – Official Portal
Malaysia External Trade Development Corporation (MATRADE) – Official Portal
Attorney General’s Chambers of Malaysia (2017) – Customs Duties Order 2017
Malaysia Digital Economy Corporation (2016) – National Ecommerce Strategic Roadmap
DHL Global – Freight Security
DHL Global – Customs, Security & Insurance
DHL Express – Customs Terminology Explained
DHL Express – Guide for DHL Express Dutiable Shipments to China
DHL SME (2017) – Creativize Grows Global Hand-In-Hand With DHL Express