Why Pay More for Less? Commercial Entry vs Postal Entry into the USA

Why Pay More for Less? Commercial Entry vs Postal Entry into the USA

As the world leader in e-commerce activity and cross-border shopping, shipping to the USA is a primary aim for many UK retailers seeking audiences beyond domestic shores.

But, while many would agree this is a highly attractive market to tap into, there is more disparity over which is the most effective and cost-efficient way of moving packages from one side of the Atlantic to the other.

This will typically come down to a decision between postal entry and commercial entry. Both represent totally viable options for e-commerce businesses – commercial entry will typically present a more comprehensive package in terms of end-to-end tracking and flexible delivery options. Postal entry is often viewed as the more cost-effective, essentials-only approach.

However, recent changes in the USA have put the price savings of postal entry under scrutiny. Here will discuss what this change means for retailers shipping into America and why now is an opportunity to reevaluate your delivery service to give your customers more bang for their buck.

What’s changed in the USA?

On 1st July 2020, the USA became the first country to opt into a new plan by the UPU (Universal Postal Union) which allows for certain countries to self-declare their terminal dues for bulky letters and small packages sent into the country from abroad.

Known as “Option V”, this in practice means that from the beginning of July the USA is able to set their inbound delivery rates at up to 70% of the cost of domestic shipping rates (with the potential to rise 1% each year to a maximum of 80%).

If you would like to explore this plan in further detail and discover why it was introduced, you can read more here.

How has this change affected postal entry into the USA?

While we won’t dive into the details of this change in this article, the key detail that all e-commerce retailers need to be aware of is that shipping goods into the USA via postal entry will now command higher inbound rates than in years prior.

Moreover, this is a blanket rise for all packages that enter the USA, unless what is sent is light and small enough to be delivered via a letter. No organisation or item is exempt, which makes this a change that affects practically anyone looking to reach their American customers.

As this transition has fallen under the radar in the weeks and months leading to 1st July, this has been a wake-up call for many retailers across the UK who have been using postal entry as their means to send their customer orders through to the USA.

Due to the USA’s de minimis value threshold of $800 ensuring that no duty tax is paid on any items sent into the country that are valued below amount, postal entry would often be viewed as the more cost-effective option. Commercial entry deliveries incur duty tax as standard, and the clearance checks in place mean that all relevant data is captured accurately.

We work with many clients that have always utilised postal entry as the means to reach their global customers, and it has often proved to be the most fitting option depending on a company's circumstances. 

However, with this increase to inbound rates, the price benefit that once existed for postal entry has all but vanished. In this unique situation, the cost difference between postal entry and commercial entry is narrower than ever before.

Is commercial entry now the more viable option?

Imagine this altered relationship between postal entry and commercial entry as if you are choosing between a Nokia 3310 and a Samsung Galaxy S20. Both perfectly fulfil the criteria for a mobile phone. The difference is that, while the Samsung Galaxy S20 as a smartphone lets you surf the internet, download tons of apps and engage on social media, the Nokia 3310 fulfils the basic functions of phone calls, texts and games of Snake, but it costs significantly less.

Now in the USA, this change means that the Nokia and the Samsung are on virtually even footing cost-wise. This in turn makes the Samsung, with its added features and gadgets, better value. So, if they cost the same but one service offers more choice and flexibility to your business and your customers, why would you go for the less comprehensive option?

The fact of the matter is that, except in a few circumstances, all retailers looking to reach the USA via postal entry will feel the effects of this price increase, and very few (if any) will be able to swallow this to ensure customers maintain the same delivery rates. This creates a difficult dilemma for e-commerce companies – do they:

  1. Try to explain to customers why their delivery costs have notably risen without any additional features to the service they receive?
  2. Seek out an alternative delivery solution that provides customers more to justify the need for a price increase?

Today’s online consumer is increasingly savvy, and will typically expect an improvement in service to mirror any cost increases. While this change was out of the hands of retailers looking to reach their American customers, it is now a case of adapting to a new landscape.

A chance for e-commerce retailers to reflect on their delivery service

While it’s understandable to view this rise in inbound delivery rates to the USA as a burden or another hurdle for retailers to overcome, we would encourage you to instead think of this as an opportunity to reevaluate your existing delivery service.

Perhaps you are one of many businesses who have relied on postal entry due to the cost advantages it presents in most circumstances. To receive that benefit, you would typically have to compromise on areas such as tracking capabilities, speed of delivery and the choice of delivery options for your customers.

Now, with the price of postal entry and commercial entry now close to parity, now is a chance to consider the positive impact that these additional features could have on customer satisfaction. Keep in mind that in the USA:

  • 30% of American online shoppers are more likely to make an international purchase if presented with an appealing offer
  • 83% of shoppers expect to see clearly displayed delivery options
  • 88% of consumers said they like to track the status of their online orders

In addition, working with the right delivery provider can also expand your options as to how orders reach your customers. For instance, due to our status as a FedEx company, our TRAKPAK solution presents clients shipping to America with multiple entry and injection points, as well as access to both FedEx Home Delivery Service and FedEx SmartPost.

With these factors in mind, and no significant price difference in place, could your business and your customers benefit from a reassessment of your approach to delivery entry?

What do retailers switching to commercial entry need to be aware of?

If upon reflection to the changes in the USA you are now in a position to reap the benefits of commercial entry, we would encourage you to take the following piece of advice on board. When sending items onto your chosen delivery partner, it is more important than ever to present them with these key details:

  • Clear, precise product descriptions
  • HS codes (commodity codes)

These details are critical as they will make sure customs can quickly understand what the items that you are sending into the USA are so they are not classified in a restricted category, and affect how seamlessly they pass through clearance and into the delivery network.

For instance, if your product description simply says “fashion item”, that is very broad and so customs will need to assess the item in question to determine the duty tax it entails. This can lead to delays over your deliveries, which in turn can hurt your customer satisfaction. 

If your description is more specific, i.e. “men’s cotton polo shirt”, duty tax can be identified far sooner and help your flow of deliveries. It will also be useful in helping your delivery partner work with you in determining the most cost-efficient path of entry into the USA.

Why P2P is the perfect partner for your USA audience

We hope this article has helped you understand what the recent changes to USA delivery rates mean for UK e-commerce businesses and given you food for thought over your own delivery service.

We want to emphasise again that in most cases, both postal entry and commercial entry are totally viable approaches that carry their own strengths and weaknesses. However, in this unique situation in the USA, one of postal entry’s biggest advantages, cost-effectiveness, is no longer as significant as it once was.

At P2P, we are happy to discuss your specific circumstances in detail and present options that will help you manage costs and delight your customers. With unrivalled knowledge of the USA market and our partnership with FedEx, the country’s most prominent delivery provider, we can help you continue to meet and exceed the needs of your American audience.

Find out more about our TRAKPAK delivery solution for your USA customers, or speak to our team today.