On Second Thought: E-commerce, from four lanes to two

   Governments at all levels are grappling with how to deal with cross-border electronic commerce. Customs administrations worldwide have raised concerns about illicit goods, undervaluation, product safety, and more. International organizations like the World Trade Organization, regional groups such as APEC, and national customs administrations are all discussing e-commerce, but the path forward is far from clear.
   What is clear is that e-commerce is of growing importance to consumers, private sector platform companies, governments, and retailers—from small and even micro-sized businesses all the way up to large multinational corporations and everyone in between. With the success of online marketplaces like Amazon and Alibaba, there is little doubt that e-commerce will continue to expand in size, scope, and importance globally.
   Today, global business-to-consumer (B2C) e-commerce sales exceed $1.5 trillion annually. Estimates indicate that e-commerce is expected to grow by at least 20 percent year-over-year. And already we are seeing “early adopters” who have readily embraced the move to e-commerce and are reaping the rewards.
   Some members of the global trading system view the benefits of e-commerce as a potential gold rush, while others foresee benefits coming at a slower, more measured pace. Is e-commerce only a portion of cross-border trade, or is it the model for trade? If it’s the latter, then do current customs rules and regulations still fit this model? Recall the wise words of management guru Peter Drucker: “If you want something new, you have to stop doing something old.” Under the old system’s incompatible cross-border rules, e-commerce shipments too often turn what is essentially a speedy four-lane highway into a traffic-clogged, two-lane side street.
   Even today there is a lack of agreement on the basic definition of e-commerce. The World Customs Organization, the only qualified international organization to advise on customs matters, defines e-commerce as “the sale or purchase of goods or services conducted over computer network by methods specifically designed for those receiving or placing of orders.” It adds that “the transaction can be between enterprises, households, producers, individuals, governments, and other public or private organizations.” The World Trade Organization, on the other hand, has more broadly defined e-commerce as “advertising, sale, and distribution of products or services electronically.”
   It sounds so simple, right?
   One growing concern is that e-commerce is being viewed by many governments more through the lens of who is handling the shipments rather than what is being shipped. By defining e-commerce only as a small package below a certain value, we limit the ability of producers and buyers to realize the sector’s full potential. From a customs perspective, e-commerce should not be defined simply by a dollar limit or method of shipment across borders for a physical product. Rather, we should take note of urgency and focus on the trade execution that has been achieved thus far in the express shipment sector.
   Today, as the world looks to break out of economic stagnation, e-commerce could easily provide the engine. But as WTO Director General Roberto Azevedo explained, there are many obstacles in the e-commerce space, including lack of compliance with legal frameworks, intellectual property infringement, e-payment options, foreign financial payment systems, low consumer trust, and the reality that many smaller companies do not have the capacity to navigate the complexity.
   Of specific interest in the customs space, the WCO has recently established an e-commerce working group, comprised of WCO member governments, international organizations such as the International Chamber of Commerce, and most importantly private sector business representatives. I am hopeful that the producers and retailers involved in e-commerce will lead the way forward. It is important to remember that the WCO focuses on the physical movement of goods over borders. There are WTO mechanisms in place preventing countries from imposing customs duties on electronic transmissions.
   We need an “all-hands-on-deck” approach, gathering the best ideas from multiple sources, while avoiding having any organization extend its reach beyond its specific mandate. Individual governments can do a lot to spur the growth of e-commerce, both domestically and across borders, by ratifying and implementing the WTO’s Trade Facilitation Agreement (TFA), which contains provisions for expediting the cross-border movement, release and clearance of goods.
   With the right policy choices, we can look forward to continued stellar growth of e-commerce sales and the associated shipping volumes. But in the short-term, we are going to have to depend on real world problem-solving through such global organizations as the International Chamber of Commerce, WTO, WCO and APEC, among others, to harness public and private sector resources to continue to facilitate trade.
   As governments and the private sector seek viable solutions, we must all ask why only 90 nations, to date, have taken the necessary steps to ratify the TFA? Businesses, shareholders, and consumers have all pointed themselves firmly in the direction of e-commerce. The question is, which countries are open for business?
   Winston Churchill famously said, “The price of greatness is responsibility.” Global e-commerce is going to make some economies great. The challenge for governments and customs administrations is taking responsibility for shepherding that growth.