A few weeks ago, at the annual e-commerce week at UNCTAD in Geneva, Switzerland I had the opportunity to meet with interesting delegates from the public and private sector, participate on panels, listen to amazing speakers and discuss so many issues of importance in the e-commerce space !
While at the conference, I was able to catch up with old friend and colleague, Colette van der Ven, an international trade lawyer who is currently the Director of Trade and Development under the Emerging Enterprises Pro Bono Program at Sidley Austin in Geneva. Launched in 2012, the Emerging Enterprises Pro Bono Program provides free legal support to eligible small and medium-sized for-profit enterprises and market-focused NGOs and non-profits that have a clear social impact in developing countries across Africa, Asia, Central and South America, and the Caribbean. Under this program, Sidley lawyers provide free legal advice to SMEs in developing countries. Given the vast opportunities e-commerce presents, especially for SMEs, Colette is currently focusing part of her pro bono practice on helping SMEs from developing countries both identify and navigate the legal and regulatory requirements that must be complied with when conducting cross-border e-commerce.
Given her role and the work she is involved with, I took this opportunity to ask Colette some questions about her perspective and to get an understanding of what common issues she dealt with, if and how these were currently being addressed...
.....what started with a cup of coffee became a great afternoon of debates, discussion and sharing of experiences! Here is a gist of some of the insights!!
A key issue is that many SMEs from developing countries become involved in international e-commerce without first putting in place the legal instruments to protect themselves. For instance, I have had many SMEs that had not been paid for a good supplied – because of bankruptcy, rejections at the border, or other reasons. In many of these situations, the transactions were carried out without having in place legal instruments that could be invoked to obtain relief, such as buyer-seller agreements. As a result, very little, if anything, could be done to obtain relief.
A related issue is intellectual property protection, or the lack thereof. Many developing countries do not have in place a robust intellectual property system, which means that products are often traded without being copyrighted or trademarked, or benefiting from other types of intellectual property protection. This facilitates copying of designs and products, which is a frequent occurrence in many developing countries. While this is problematic not only in the context of international e-commerce, the risk that designs are copied when engaging in international e-commerce is amplified as products are exposed to a much larger audience.
Another key issue concerns the costs of product returns. A large number of products purchased internationally through e-commerce are being returned, either because consumers are unsatisfied, or because they are rejected at the border on the basis of non-compliance. This is especially the case for products originating from developing countries. The costs of returned products, which includes shipping costs and often additional VAT charges, are born by the seller. Thus, each time a product is returned, not only does a seller forego the anticipated payment for the product; it will also incur the additional costs associated with returning the good. This constitutes a serious risk factor for SMEs in developing countries to start engaging in international e-commerce.
Another issue that I encounter frequently is a lack of knowledge on how to ensure the correct tariff is applied to a product. Many SMEs from developing countries do not know that they are eligible to receive preferential tariffs when selling products into high value markets like the European Union and the United States. However, to ensure that the preferential tariff is applied requires an SME to fill out the requisite paper work. A general lack of awareness means that often, SMEs end up paying the normal tariff rates for products that could have been imported at reduced margins. As a result, the consumer will pay more for the product, which could, in turn, impact the competitiveness of the SME.
finding solutions?..... to be continued...!
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