The rise of parcels trade

The Covid-19 pandemic has seen a major increase in online business that part of which has become to be known as trade in parcels. This phenomenon has been openly embraced globally as it seeks to support economic activity in periods of crisis such as presented by the Covid-19 pandemic.

This positive development now demands a review of several policies in the international trade spectrum as trade in parcels is complex, fraught with supply/demand and at the border challenges as revealed by studies.

In essence trade in parcels rides on e-commerce that touches on several aspects of trade facilitation including regulatory frameworks that cover competition and fiscal policies.

In contrast to containerisation, trade in parcels is more involving with far more interlinked players and policies as described.

Increased digital trade has had its impact on traditional commerce thereby threatening the status quo within the competition policies. The inherent danger of social inequalities caused by cartels who may regulate supplies is ever present especially in developing countries where e-commerce regulation is to take a foothold.

In a situation where there is an abundance of suppliers the opposite occurs due to several players that can institute market efficiency, enabling low income consumers to afford the goods and services.

Cross border trade in parcels calls for a review in taxation policies influenced by the definition of geographical borders and customs procedures visa vis the traditional importation of parcels before the digital era.

A report by Organisation of Economic Cooperation and Development reveals a significant change in cross border parcel shipments’ type and value.

According to the report in the period January to April 2020 there has been a global increase in small parcels covering electrical, pharmaceuticals, mechanical parts and medical instruments.

Lockdown measures including social distancing to mitigate Covid-19 has impacted consumer patterns as evidenced by the sharp increase of small parcels of games, books and toys.

The role of customs as dictated by this surge of trade in parcels becomes critical.

The change in type and value of small parcels demands the Customs Administration in its role as a watchdog of departments of health, environment and safety etc to increase the enforcements without stifling trade revisiting the de-minimis principle.

The balancing act between trade facilitation and revenue collection will be an area for policy makers to consider very seriously.

Maintaining current thresholds for nominal clearance against a deluge of small parcels could be overwhelming for the customs personnel nevertheless negatively impact the fiscus.

The fiscus may benefit from a downward review of the de -minimis levels but not without seriously impeding the smooth movement of the increased volume of small parcels as they get subjected to duty payment.

The World Development Report of 2021 reports that the EU’s nominal clearance for small parcels pegged at US$100 presented numerous challenges as it eroded VAT and other tax heads.

This forced the EU and other countries to completely remove the nominal clearance thresholds and reduce the threshold to widen the tax base and plug the revenue leakages.

The above development remains attractive to developing countries as way of raising flows to the fiscus however, with the advent of the Africa Continent Free Trade Agreement that is already in operation; the premise of tariffs as source of increase in revenue in contrast to increase in revenue trade as a result free trade has been rejected by research.

Revenue from increased trade far exceeds revenue from tariffs.

The AfCFTA vision “is comprehensive technology that facilitates connections across all key factors rapidly, cost effectively and efficiently regardless of size, since historically small and medium size enterprises in particular have not been able to take advantage of trade agreements,” as articulated by Secretary General Wamkele Mene.

African e-Trade Group — a key partner of Africa Union Commission through a digital platform known as Sokokuu envisages to expand markets for African goods and services through enabled digital transformation of Africa.

This initiative is premised on relationships with national governments in Africa through the use of ICT to enable smooth tax collection through a transparent reporting system.

The AfCFTA being an inclusive trade agreement currently in e-commerce negotiations, will need to consider leveraging trade in parcels for the benefit of the MSMEs where women are disproportionately represented.

While e-commerce enables MSMEs easy access to wide markets however, the uptake remains relatively low due the low rate of their technology adoption.

In addition, the AU Digital Transformation Strategy for Africa 2020-2030 observes a gender gap in mobile access and usage that may perpetuate inequality across the continent moreover with the upsurge in trade in parcels a development likely to become a reality.

Cross border trade in parcels through e-commerce presents a huge opportunity for inclusive trade through regulatory frame work that will compliment the efforts of logistic companies, delivery companies, postal services and freight-forwarders while protecting the private data emanating from the service chain.

The “appropriate soft infrastructure-enabled mechanisms-such as enhanced connectivity, more effective training delivery and stronger feedback loops, complaints channels, and resolution methods — can boost the capacity building of trade and customs officials and align structural policy for overall deeper integration,” according to Secretary General Wamkele Mene.

This is the position that policy makers may consider as they review the regulatory framework of e-commerce and trade in parcels.-herald.cl.zw